QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to

Commission File Number 000-33095

ACHILLION
PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware

52-2113479

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

300 George Street, New Haven, CT

06511

(Address of principal executive offices)

(Zip Code)

(203) 624-7000

(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes
x
No
¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated
filer
¨
Accelerated filer
¨
Non-accelerated filer
x

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
x

As of August 1, 2007, the registrant had
15,600,309 shares of Common Stock, $0.001 par value per share, outstanding.

Achillion Pharmaceuticals, Inc. (the Company) was incorporated on August 17, 1998 in Delaware. The
Company was established to discover, develop and commercialize innovative anti-infective drug therapies. The Company is devoting substantially all of its efforts towards product research and development.

The Company incurred losses of $125,188 from inception through June 30, 2007 and had an accumulated deficit of $139,050 through June 30, 2007.
The Company has funded our operations primarily through the sale of equity securities, borrowings from debt facilities, and the receipt of milestone and cost-sharing receipts from our collaboration partner, Gilead Sciences.

The Company expects to incur substantial and increasing losses for at least the next several years and will need substantial additional financing to
obtain regulatory approvals, fund operating losses, and, if deemed appropriate, establish manufacturing and sales and marketing capabilities, which we will seek to raise through public or private equity or debt financings, collaborative or other
arrangements with third parties or through other sources of financing. There can be no assurance that such funds will be available on terms favorable to us, if at all. In addition to the normal risks associated with early-stage companies, there can
be no assurance that we will successfully complete our research and development, obtain adequate patent protection for our technology, obtain necessary government regulatory approval for drug candidates we develop or that any approved drug
candidates will be commercially viable. In addition, we may not be profitable even if we succeed in commercializing any of our drug candidates.

2.
Basis of Presentation

The accompanying unaudited condensed financial statements of Achillion Pharmaceuticals, Inc. (the
Company) should be read in conjunction with the audited financial statements and notes as of and for the year ended December 31, 2006 included in the Companys Annual Report on Form 10-K filed with the SEC on March 29,
2007. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information, in accordance with the instructions to Form 10-Q and the
guidance in Article 10 of Regulation S-X.

Accordingly, since they are interim financial statements, the accompanying financial statements do not include all of the information and disclosures
required by U.S. GAAP for complete financial statements. The accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair statement of the results
of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The
preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and notes thereto. A discussion of the Companys critical accounting
policies and management estimates is described in the Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this quarterly report on Form 10-Q.

In the fourth quarter of 2006, the Company completed an initial public offering of 5,175 shares of its common stock, including the underwriters
overallotment option, at a public offering price of $11.50 per share. Net proceeds to the Company were approximately $53,400, after deducting underwriting discounts and commissions and offering expenses. In connection with the Companys initial
public offering, the outstanding shares of Series A, Series B, Series C, Series C-1 and Series C-2 Convertible Preferred Stock (the Preferred Stock) were converted into 9,834 shares of common stock, including shares issued in
satisfaction of $15,400 of accrued but unpaid dividends on the Preferred Stock as of October 31, 2006, the closing date of the initial public offering transaction.

3. Earnings (Loss) Per Share (EPS)

Basic EPS is calculated in accordance with Statement
of Financial Accounting Standards (SFAS) No. 128, or SFAS No. 128,
Earnings per Share
, by dividing net income or loss attributable to common stockholders by the weighted average common stock outstanding. Diluted EPS is
calculated in accordance with SFAS No. 128 by adjusting weighted average common shares outstanding for the dilutive effect of common stock options, warrants, convertible preferred stock and accrued but unpaid convertible preferred stock
dividends. In periods where a net loss is recorded, no effect is given to potentially dilutive securities, since the effect would be antidilutive. Total securities that could potentially dilute basic EPS in the future that were not included in the
computation of diluted EPS because to do so would have been antidilutive for the six months ended June 30, 2007 and 2006 were as follows (prior to consideration of the treasury stock method):

Six Months Ended June 30,

2007

2006

Options

1,182

829

Warrants

312

336

Convertible Preferred Stock, as converted



8631

Accrued but unpaid Convertible Preferred Stock dividends



1,052

Total potentially dilutive securities outstanding

1,494

10,848

4. Collaboration Arrangement

In November 2004, the Company entered into a collaboration arrangement (the Gilead Arrangement) with Gilead Sciences Inc. (Gilead), which was amended in March 2007, to jointly develop and
commercialize compounds for use in treating hepatitis C infection, which inhibit viral replication through a specified novel mechanism of action. Commercialization efforts will commence under the Gilead Arrangement only if such compounds are found
to be commercially viable and all appropriate regulatory approvals have been obtained. In connection with this arrangement, Gilead paid to the Company $10,000 as payment for a non-refundable up-front license fee and 2,300 shares of Series C-1
Convertible Preferred Stock (Series C-1).

Under the Gilead Arrangement, the Company and Gilead will work together to develop one or more compounds
for use in treating hepatitis C infection until proof-of-concept in one compound, as defined in the Gilead Arrangement, is achieved (the Research Period). Subsequent to the achievement of proof-of-concept, the Company has no further
obligation to continue providing services to Gilead but, at Gileads request, the Company may elect to extend the Research Period for up to an additional two years after proof-of-concept is established, based upon good faith negotiations at
that point in time. Further, if it is agreed that potential back-up compounds should continue to be researched, good faith negotiations would also be conducted to determine the specifics of that arrangement.

Gilead has agreed to make milestone payments to the Company upon the achievement of various defined clinical, regulatory and commercial milestones, such
as regulatory approval in the United States, the European Union, or Japan. The Company could receive up to $157,500 in development, regulatory and sales milestone payments, assuming the successful simultaneous development of a lead and back-up
compound, and annual sales in excess of $600,000. The Company could also receive royalties on net sales of products if commercialization is achieved.

The up-front payment of $10,000 was first allocated to the fair value of the Series C-1, as determined by management after considering a valuation analysis performed by an unrelated third-party valuation firm at the
direction of the Company, in which each share of the Series C-1 was determined to be worth $0.88, or approximately $2,000 in aggregate. The remaining $8,000 balance of the $10,000 is being accounted for as a non-refundable up-front license fee. Due
to certain provisions contained within the Gilead Arrangement relating to services to be performed on both the primary and backup compounds, as defined in the Gilead Arrangement, the non-refundable up-front license fee, as well as any milestones
achieved during the Research Period, including a $2,000 milestone received in 2005, are being accounted for under the proportionate performance model. Revenue recognized under a proportionate performance model is limited by the aggregate cash
received or receivable to date by the Company. Milestones achieved, if any, after the termination of the Research Period, will be recognized when the milestone is achieved as the Company has no further research or development obligations after the
Research Period.

Under the Gilead Arrangement, through March 31, 2007, agreed upon research or development expenses, including
internal full-time equivalent (FTE) costs and external costs, incurred by both companies during the period up to proof-of-concept were borne equally by both parties. Prior to March 31, 2007, the Company was incurring the majority of
those expenses and, therefore, was the net receiver of funds under this cost-sharing portion of the arrangement. Effective April 1, 2007, internal costs, including FTE costs are no longer subject to this cost-sharing arrangement. Instead, each
party bears its own internal costs, including FTE costs. External costs continue to be shared equally by both parties. The Company and Gilead also revised their joint research program to focus on next-generation NS4A antagonists, after discontinuing
clinical trials for ACH-806, an NS4A antagonist the Company was previously evaluating. As a result, the Company extended the period over which its remaining obligations under the agreement would be completed. Accordingly, the period over which the
Company recognizes amounts received under the Gilead Arrangement has been extended; resulting in lower revenue for the six month period ended June 30, 2007 than amounts recognized in previous quarters.

Gilead has the right to terminate the Gilead Arrangement without cause upon 120 days written notice to the Company. Upon termination of the Gilead
Arrangement for any reason, all cost share amounts due and payable through the date of termination shall be paid by the appropriate party and no previously paid amounts will be refundable.

During the three months ended June 30, 2007 and 2006, the Company recognized revenue of $1,195 and $2,098, respectively, under this collaboration
agreement, of which $722 and $1,312, respectively, related to the recognition of the non-refundable fee and pre-proof-of-concept milestone under

the proportionate performance model. The remaining $473 and $786 recognized during the three months ended June 30, 2007 and 2006, respectively, relate
to FTE and external costs billed under the Gilead Arrangement, net of payments made to Gilead of $109 and $392 for the three months ended June 30, 2007 and 2006, respectively. Payments to Gilead under this collaboration are recognized as a
reduction in revenue.

During the six months ended June 30, 2007 and 2006, the Company recognized revenue of $2,710 and $4,160,
respectively, under this collaboration agreement, of which $1,475 and $2,500, respectively, related to the recognition of the non-refundable fee and pre-proof-of-concept milestone under the proportionate performance model. The remaining $1,235 and
$1,660 recognized during the six months ended June 30, 2007 and 2006, respectively, relate to FTE and external costs billed under the collaboration, net of payments made to Gilead of $358 and $906 for the six months ended June 30, 2007 and
2006, respectively. Payments to Gilead under this collaboration are recognized as a reduction in revenue.

Included in the accompanying
balance sheets as of June 30, 2007 and December 31, 2006, is $30 and $772, respectively, of receivables resulting from this collaboration agreement and $3,575 and $5,265, respectively, of deferred revenue resulting from the up-front fee
and the $2,000 milestone payment received during the Research Period and FTE costs. In addition to Gileads rights to unilaterally terminate this agreement, each party has the right to terminate for material breach; however the Company may
terminate for Gileads breach only on a market-by-market basis, and, if applicable, a product-by-product basis.

5. Marketable Securities

The Company classifies its entire investment portfolio as available for sale as defined in SFAS No. 115,
Accounting for Certain
Investments in Debt and Equity Securities
. As of June 30, 2007 and December 31, 2006, the Companys investment portfolio consisted of U.S. government and agency securities held by a major banking institution. The maturities of
marketable securities of $38,952 and $39,904 at June 30, 2007 and December 31, 2006, respectively, are less than one year.

Securities are carried at fair value with the unrealized gains/losses reported as a separate component of stockholders equity. The unrealized gain from marketable securities was $32 and $18 at June 30, 2007 and December 31,
2006, respectively.

As of June 30, 2007 and December 31, 2006, none of the Companys investments were determined to be
other than temporarily impaired.

Accrued clinical trial and preclinical trial expenses are comprised of amounts owed to third-party
contract research organizations or CROs, clinical investigators, laboratories and data managers for research and development work performed on behalf of the Company. At each period end the Company evaluates the accrued clinical trial
expense balance based upon information received from each party and ensures that the estimated balance is reasonably stated based upon the information available to the Company. Such estimates are subject to change as additional information becomes
available.

7. Long-Term Debt

Long-term debt consists of the following:

June 30,
2007

December 31,
2006

CII Term Loan, payable in monthly installments of $13 through September 2010 with a final balloon payment of $686, with interest at
7.5% per annum

$

975

$

1,015

2002 CII Term Loan, payable in monthly installments of $6 through October 2007, with interest at 7.5% per annum

22

54

2002 Credit Facility, payable in monthly installments as the individual notes mature through January 2007, with interest ranging from 8.01% to
10.17% per annum



26

2003 Credit Facility, payable in monthly installments as the individual notes mature through May 2008, with interest ranging from 6.72% to
9.27% per annum

359

458

2005 Credit Facility, payable in monthly installments as the individual notes mature through June 2010, with interest ranging from 10.92% to
11.58% per annum

6,642

7,346

Total long-term debt

7,998

8,899

Less: current portion

(3,926

)

(3,572

)

Total long-term debt, net of current portion

$

4,072

$

5,327

In June 2007, the Company expanded the 2005 Credit Facility, borrowing an additional $800 to fund
an office and lab expansion project.

8. Stock-Based Compensation

The Companys 2006 Stock Incentive Plan, or the 2006 Plan, is administered by the Companys Board of Directors and provides for the grant of incentive stock options, nonstatutory stock options, restricted
stock, restricted stock units, stock appreciation rights and other stock-based awards. The Companys officers, employees, consultants, advisors and directors, are eligible to receive awards under the 2006 Plan; however, incentive stock options
may only be granted to employees. Options granted are exercisable for a period determined by the Company, but in no event longer than ten years from the date of the grant. Options generally vest ratably over four years. There were 751 shares
available to be granted under our 2006 Plan as of June 30, 2007.

A summary of the status of the Companys stock option activity for the six months ended
June 30, 2007 is presented in the table and narrative below:

Options

Weighted
Average
Exercise
Price

Outstanding at January 1, 2007

1,208

$

6.53

Granted

67

6.40

Exercised

(33

)

1.97

Cancelled/Forfeited

(62

)

10.84

Outstanding at June 30, 2007

1,180

$

6.42

Options exercisable at June 30, 2007

785

$

2.83

Weighted-average fair value of options granted during the period

$

4.27

The Company utilizes the Black-Scholes option pricing model for determining the estimated fair
value for stock-based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of the stock-based awards. The assumptions used to value options granted are as follows:

For the Six Months Ended

June 30, 2007

June 30, 2006

Expected term of option

6.1 years

5 years

Expected volatility

70

%

70

%

Risk free interest rate

4.51  4.94

%

4.30

%

Expected dividend yield

0

%

0

%

Total compensation expense recorded in the accompanying statements of operations associated with
option grants made to employees for the three months ended June 30, 2007 and 2006 was $400 and $162, respectively. Total compensation expense recorded in the accompanying statements of operations associated with option grants made to employees
for the six months ended June 30, 2007 and 2006 was $807 and $323, respectively. The Company recorded no tax benefit related to these options since the Company currently maintains a full valuation allowance.

As of June 30, 2007, the intrinsic value of the options outstanding was $2,777, of which $1,956 related to vested options and $821 related to
unvested options. The intrinsic value for stock options is calculated based on the difference between the exercise prices of the underlying awards and the quoted stock price of our common stock as of the reporting date.

As of June 30, 2007, the total compensation cost related to unvested options not yet recognized in the financial statements is approximately $4,266,
net of estimated forfeitures, and the weighted average period over which it is expected to be recognized is 1.67 years.

The Company also
occasionally grants stock option awards to consultants. Such grants are accounted for pursuant to Emerging Issue Task Force (EITF) No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services
, and, accordingly, the Company recognizes compensation expense equal to the fair value of such awards and amortizes such expense over the performance period. Total expense for the
three months ended June 30, 2007 and 2006 was $1 and $6, respectively and total expense for the six months ended June 30, 2007 and 2006 was $4 and $41, respectively.

The Company established an Employee Stock Purchase Plan effective December 1, 2006 (the 2006 ESPP). A total of 250 shares of common stock are available for issuance under the 2006 ESPP. Eligible
employees can purchase common stock pursuant to payroll deductions at a price equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six-month offering period.

The Company measures the fair value of issuances under the employee stock purchase plan using the Black-Scholes option pricing model at the end of each
reporting period. The compensation cost for the 2006 ESPP consists of the discount (15% of the grant date stock price) and the fair value of the option features. The Black-Scholes model requires the use of assumptions that determine the fair value
of the stock-based awards. The assumptions used to value issuances under the 2006 ESPP are similar to those used to value stock options except that the expected term is six months.

For the six months ended June 30, 2007, the Company issued 20 shares associated with the 2006 ESPP. The Company recorded compensation expense of
($3) for the three months ended June 30, 2007 and $33 for the six months ended June 30, 2007. There was no compensation expense related to the Plan for the three or six months ended June 30, 2006 as the Plan was not established until
December 1, 2006. As of June 30, 2007, 230 shares remained available for future issuance under the 2006 ESPP.

9. Income Taxes

The Company uses an asset and liability approach for financial accounting and reporting of income taxes. Deferred tax assets and liabilities are
determined based on temporary differences between financial reporting and tax basis assets and liabilities and are measured by applying enacted rates and laws to taxable years in which differences are expected to be recovered or settled. Further,
the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Effective January 1, 2007, the Company adopted Financial Accounting Standards Board, (FASB) issued Interpretation No.48,
Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No.109,
or
FIN 48
.
FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return (including a
decision whether to file or not file a return in a particular jurisdiction). Under FIN 48, the financial statements reflect expected future tax consequences of such positions presuming the taxing authorities full knowledge of the position and
all relevant facts.

The IRS could challenge tax positions taken by the Company for the periods for which there are open tax years. The
Company is open to challenge for the periods of 1998 through 2006 from federal and the State of Connecticut jurisdictions.

As a result of
implementation of FIN 48, the Company recognized a decrease of $180 in its liability for uncertain tax positions, which was accounted for as a decrease to the January 1, 2007 accumulated deficit. The Company did not have any unrecognized tax
benefits as of the date of adoption or June 30, 2007.

At December 31, 2006, the Companys federal and state net operating
loss carryforwards, or NOLs, were approximately $101,201 and $102,709, respectively, and the Company had gross deferred income tax assets of approximately $49,069, which resulted primarily from the federal and state NOL and tax credit carryforwards.
In accordance with SFAS No. 109 
Accounting for Income Taxes,
 or SFAS 109, the Company maintains a full valuation allowance against its deferred tax assets and liabilities.

Utilization of the NOL and research and development credit carryforwards may be subject to a substantial
annual limitation under Section 382 of the Internal Revenue Code of 1986 due to changes in ownership of the Company that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and
research and development credit carryforwards that can be utilized annually to offset future taxable income and tax. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain
shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. Since the Companys formation, the Company has raised capital through the issuance of capital stock on several occasions
which, combined with the purchasing shareholders subsequent disposition of those shares, may have resulted in a change of control, as defined by Section 382. Due to the significant complexity and cost associated with a change in control
study, and because there could be additional changes in control in the future, the Company has not assessed whether there has been one or more changes in control since the Companys formation. If the Company has experienced a change of control
at any time since Company formation, utilization of its NOL or research and development credit carryforwards would be subject to an annual limitation under Section 382. Any limitation may result in expiration of a portion of the NOL or research
and development credit carryforwards before utilization which would reduce the Companys gross deferred tax assets.

The Company does
not have any interest or penalties accrued related to tax positions as it does not have any unrecognized tax benefits. In the event the Company determines that accrual of interest or penalties is necessary in the future, the amount will be presented
as a component of income taxes.

10. Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No.157,
Fair Value Measurements.
SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The standard is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. The Company does not believe that its adoption in the first quarter of 2008 will have a material impact on the Companys financial statements.

In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities
. SFAS No. 159
permits an entity to elect to report many financial assets and liabilities at fair value. Entities electing the fair value option would be required to recognize changes in fair value in earnings and are required to distinguish, on the face of the
statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. The initial adjustment to reflect the
difference between the fair value and the carrying amount would be accounted for as a cumulative-effect adjustment to retained earnings as of the date of initial adoption. SFAS No. 159 is effective as of the beginning of an entitys first
fiscal year beginning after November 15, 2007. The Company is currently evaluating the impact, if any, of FAS 159 on its financial statements.

In June 2007, the EITF reached a consensus on EITF Issue No. 07-03,
Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities
. EITF 07-03 concludes that
non-refundable advance payments for future research and development activities should be deferred and capitalized until the goods have been delivered or the related services have been performed. If an entity does not expect the goods to be delivered
or services to be rendered, the capitalized advance payment should be charged to expense. This consensus is effective for fiscal years beginning after December 15, 2007. The initial adjustment to reflect the effect of applying the consensus as
a change in accounting principle would be accounted for as a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. The Company does not believe that its adoption in the first quarter of 2008 will have a
material impact on the Companys financial statements.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, that involve risks and uncertainties. All statements other than statements relating to historical matters (including statements to the effect that we believe, expect, anticipate, plan,
target and similar expressions) should be considered forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a number of important factors, including
factors discussed in this section and elsewhere in this quarterly report on Form 10-Q, including those discussed in Item 1A of this report under the heading Risk Factors, and the risks discussed in our other filings with the
Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect managements analysis, judgment, belief or expectation only as the date hereof. We assume no obligation to
update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Overview

We are a biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for infectious diseases. Within
the anti-infective market, we are currently concentrating on the development of antivirals and antibacterials. We are targeting our antiviral development efforts on treatments for HIV infection and chronic hepatitis C infection, and we are directing
our antibacterial development efforts toward treatments for serious hospital-based bacterial infections.

We have devoted and are
continuing to devote substantially all of our efforts toward product research and development. We have incurred losses of $125 million from inception through June 30, 2007 and had an accumulated deficit of $139 million through June 30,
2007. Our net losses were $15.3 million and $9.2 million for the six months ended June 30, 2007 and 2006, respectively.

In the fourth
quarter of 2006, we completed an initial public offering of 5,175,000 shares of common stock at a price of $11.50 per share, which includes the exercise of the underwriters over-allotment option. Proceeds to us from the offering were
approximately $53.4 million, net of underwriting discounts and commissions and offering expenses.

Financial Operations Overview

Revenue

To date, we have not
generated revenue from the sale of any drugs. The majority of our revenue recognized to date has been derived from our collaboration with Gilead Sciences to develop compounds for use in treating chronic hepatitis C infection. During the six months
ended June 30, 2007 and 2006, we recognized $2.7 million and $4.2 million, respectively, under this collaboration arrangement.

Upon
initiating our collaboration with Gilead Sciences, we received a payment of $10.0 million, which included an equity investment by Gilead Sciences determined to be worth approximately $2.0 million. We are accounting for the remaining $8.0 million as
a nonrefundable up-front fee. Due to certain provisions contained within our collaboration with Gilead Sciences relating to services to be performed on both the primary and backup compounds, the non-refundable up-front license fee, as well as any
milestones achieved during the period prior to when proof-of-concept in one compound is achieved, including a $2.0 million milestone received in 2005, are being accounted for under the proportionate performance model. Revenue under the proportionate
performance model is recognized as our effort under the collaboration is incurred. When our performance obligation is complete, we will recognize milestone payments, if any, when the corresponding milestone is achieved. We will recognize royalty
payments, if any, upon product sales. We revised our joint research program with Gilead in early 2007 to focus on next-generation NS4A antagonists. As a result, we extended the period over which our remaining obligations under the arrangement would
be completed. Accordingly, the period over which we recognize amounts received under the arrangement has been extended, resulting in lower revenue for the six month period ended June 30, 2007.

Research and development expenses under our collaboration with Gilead Sciences, including internal
full-time equivalent costs and external research costs, incurred by both companies prior to proof-of-concept, were borne equally by both parties through March 31, 2007. As we were providing the majority of those services and were incurring the
majority of those expenses, we were the net recipient of funds under this cost-sharing portion of the arrangement and therefore recognized the reimbursed costs as revenue rather than research expense. We are recognizing payments made by us to Gilead
Sciences in connection with this collaboration as a reduction of revenue. Effective April 1, 2007, internal full-time equivalent costs are no longer subject to this cost-sharing arrangement. Instead, each party provides for the costs of their
own full-time equivalents. We expect that the relative full-time equivalent efforts of each of Achillion and Gilead Sciences will remain approximately one-half of total efforts. We continue to equally share external research costs with Gilead
Sciences.

We have also recognized revenue under a Small Business Innovation Research, or SBIR, grant by the National Institutes of Health,
or NIH, related to our HIV capsid research program. During the six months ended June 30, 2007 and 2006 we recognized $35,000 and $158,000 respectively, in revenue under this grant. Efforts under our Small Business Innovation Research, or SBIR,
grant were completed in the first quarter of 2007. No additional grant revenue related to this grant will be recognized.

Research
and Development

Our research and development expenses reflect costs incurred for our proprietary research and development projects
as well as costs for research and development projects conducted as part of collaborative arrangements we establish. These costs consist primarily of salaries and benefits for our research and development personnel, costs of services by clinical
research organizations, other outsourced research, materials used during research and development activities, facility-related costs such as rent and utilities associated with our laboratory and clinical development space, and operating supplies. We
expect research and development costs to increase significantly over the next several years as our drug development programs progress.

We
have established our drug candidate pipeline through our internal discovery capabilities and through the in-licensing of an attractive drug candidate. Through these efforts we have identified and are developing candidates in the following areas:



Elvucitabine for HIV Infection.
Elvucitabine is an antiviral we are developing for the treatment of HIV infection. We are currently evaluating elvucitabine
in phase II clinical trials to further explore its safety and efficacy in HIV-infected patients.



ACH-702 for Serious Hospital-Based Bacterial Infections.
Our most advanced preclinical candidate is ACH-702, which we are developing for the treatment of
serious hospital-based bacterial infections.



NS4A Antagonists for Chronic Hepatitis C Infection.
In our second preclinical-stage program, we are evaluating drug candidates with a unique mechanism of
action for the treatment of chronic hepatitis C in collaboration with Gilead Sciences.

All costs associated with
internal research and development, and research and development services for which we have externally contracted, are expensed as incurred. Our research and development expenses are outlined in the table below.

Currently, we are conducting two phase II clinical trials with elvucitabine and preclinical
studies with ACH-702. In February 2007, we and our collaborator, Gilead Sciences, discontinued a proof-of-concept clinical trial for ACH-806, an NS4A antagonist we were previously evaluating for the treatment of chronic hepatitis C, and are
currently completing our assessment of new lead candidates in order to nominate one for clinical development. From the inception of each respective program through June 30, 2007, we incurred approximately $39.6 million in total costs for
elvucitabine, approximately $16.4 million in total costs for ACH-702 and approximately $27.6 million in total costs for our NS4A antagonist program (including ACH-806). These figures include our internal research and development personnel costs and
related facilities overhead. We expect our research and development costs to increase substantially in the foreseeable future. We currently estimate that the clinical trial costs for two phase III clinical trials of elvucitabine in different HIV
populations will be approximately $48.0 million, exclusive of the internal personnel costs associated with conducting these trials. We estimate that the costs associated with completing preclinical studies and phase I clinical trials with ACH-702
will be approximately $3.0 million, exclusive of the internal personnel costs associated with conducting these studies and trials. We anticipate that the costs associated with preclinical development through proof-of-concept of our next generation
NS4A antagonist will be approximately $3.7 million, exclusive of internal personnel costs. This amount for NS4A represents one-half of the external costs associated with those activities, as we share such external costs with Gilead Sciences.

General and Administrative

Our general and administrative expenses consist primarily of salaries and benefits for management and administrative personnel, professional fees for legal, accounting and other services, travel costs and
facility-related costs such as rent, utilities and other general office expenses. We expect our general and administrative expenses to increase as we continue to hire additional employees, increase our recruiting efforts, expand our infrastructure
and incur additional costs related to the growth of our business and operations as a public company.

The discussion and analysis of our financial condition and results of operations set forth below are based on our financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including
those described below. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Management makes estimates and exercises judgment in revenue recognition, research and development costs, stock-based compensation and accrued expenses. Actual
results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies
affect managements more significant judgments and estimates used in the preparation of our financial statements:

Revenue
Recognition

We recognize revenue from contract research and development and research progress payments in accordance with Staff
Accounting Bulletin, or SAB, No. 104,
Revenue Recognition
, or SAB 104, and Financial Accounting Standards Board, or FASB, Emerging Issue Task Force, or EITF, Issue No. 00-21,
Accounting for Revenue Arrangements with Multiple
Deliverables
, or EITF 00-21. Revenue-generating research and development collaborations are often multiple element arrangements, providing for a license as well as research and development services. Such arrangements are analyzed to determine
whether the deliverables, including research and development services, can be separated or whether they must be accounted for as a single unit of accounting in accordance with EITF 00-21. We recognize up-front license payments as revenue upon
delivery of the license only if the license has standalone value and the fair value of the undelivered performance obligations can be determined. If the fair value of the undelivered performance obligations can be determined, such obligations would
then be accounted for separately as performed. If the license is considered to either (1) not have standalone value or (2) have standalone value but the fair value of any of the undelivered performance obligations cannot be determined, the
arrangement would then be accounted for as a single unit of accounting and the upfront license payments are recognized as revenue over the estimated period of when our performance obligations are performed.

When we determine that an arrangement should be accounted for as a single unit of accounting, we must determine the period over which the performance
obligations will be performed and revenue related to upfront license payments will be recognized. Revenue will be recognized using either a proportionate performance or straight-line method. We recognize revenue using the proportionate performance
method provided that we can reasonably estimate the level of effort required to complete our performance obligations under an arrangement and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time
equivalents are typically used as the measure of performance. Under the proportionate performance method, periodic revenue related to upfront license payments is recognized as the percentage of actual effort expended in that period to total effort
expected for all of our performance obligations under the arrangement. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which we expect to complete our related
performance obligations. In the event that a change in estimate occurs, the change will be accounted for using the cumulative catch-up method, which provides for an adjustment to revenue in the current period. Estimates of our level of effort may
change in the future, resulting in a material change in the amount of revenue recognized in future periods. We revised our joint research program with Gilead in early 2007 to focus on next-generation NS4A antagonists. As a result, we extended the
period over which our remaining obligations under the arrangement would be completed. Accordingly, the period over which we recognize amounts received under the arrangement has been extended, resulting in lower revenue for the six month period ended
June 30, 2007.

Collaborations may also involve substantive milestone payments. Substantive milestone payments are
considered to be performance bonuses that are recognized upon achievement of the milestone only if all of the following conditions are met: (1) the milestone payments are non-refundable, (2) achievement of the milestone involves a degree
of risk and was not reasonably assured at the inception of the arrangement, (3) substantive effort is involved in achieving the milestone, (4) the amount of the milestone payment is reasonable in relation to the effort expended or the risk
associated with achievement of the milestone and (5) a reasonable amount of time passes between the upfront license payment and the first milestone payment as well as between each subsequent milestone payment.

Reimbursement of costs is recognized as revenue provided the provisions of EITF Issue No. 99-19 are met, the amounts are determinable and collection
of the related receivable is reasonably assured.

Stock-Based Compensation  Employee Stock-Based Awards

We primarily grant qualified stock options for a fixed number of shares to employees with an exercise price equal to the market value of the shares at the
date of grant. Under the fair value recognition provisions of Financial Accounting Standards No. 123 (revised 2004), Share
-Based Payment
, or SFAS 123R, stock-based compensation cost is based on the value of the portion of stock-based
awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized during the six months ended June 30, 2007 and 2006 includes compensation expense for stock-based awards granted prior to, but not yet
vested as of December 31, 2005, based on the fair value on the grant date estimated in accordance with the pro forma provisions of SFAS 123. Compensation expense also includes amounts related to the stock-based awards granted subsequent to
December 31, 2005, based on the fair value on the grant date, estimated in accordance with the provisions of SFAS 123R.

We selected
the Black-Scholes option pricing model as the most appropriate method for determining the estimated fair value for stock-based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of the stock-based awards.
Determining the fair value of stock-based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock and expected dividends. In addition, we previously accounted for
forfeitures as they occurred. In accordance with SFAS 123R, we are required to estimate forfeitures at the grant date and recognize compensation costs for only those awards that are expected to vest. Judgment is required in estimating the amount of
stock-based awards that are expected to be forfeited.

If factors change and we employ different assumptions in the application of SFAS
123R in future periods, the compensation expense that we record under SFAS 123R may differ significantly from what we have recorded in the current period. Therefore, we believe it is important for investors to be aware of the high degree of
subjectivity involved when using option pricing models to estimate share-based compensation under SFAS 123R. There is risk that our estimates of the fair values of our share-based compensation awards on the grant dates may differ from the actual
values realized upon the exercise, expiration, early termination or forfeiture of those share-based payments in the future. Certain share-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic
value as compared to the fair values originally estimated on the grant date and reported in our financial statements. Alternatively, value may be realized from these instruments that is significantly in excess of the fair values originally estimated
on the grant date and reported in our financial statements. Although the fair value of employee share-based awards is determined in accordance with SFAS 123R and SAB 107 using an option pricing model, that value may not be indicative of the fair
value observed in a willing buyer/willing seller market transaction.

We occasionally grant stock option awards to consultants. Such grants are accounted for pursuant to EITF Issue No. 96-18,
Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services
, and, accordingly, we recognize compensation expense equal to the fair value of such awards and amortize such expense
over the performance period. We estimate the fair value of each award using the Black-Scholes model. The unvested equity instruments are revalued on each subsequent reporting date until performance is complete, with an adjustment recognized for any
changes in their fair value. We amortize expense related to non-employee stock options in accordance with FASB Interpretation 28,
Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.

Accrued Expenses

As part of
the process of preparing financial statements, we are required to estimate accrued expenses. This process involves identifying services which have been performed on our behalf and estimating the level of service performed and the associated cost
incurred for such service as of each balance sheet date in our financial statements.

In accruing service fees, we estimate the time period
over which services will be provided and the level of effort in each period. If the actual timing of the provision of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. The majority of our service
providers invoice us monthly in arrears for services performed. In the event that we do not identify costs that have begun to be incurred or we underestimate or overestimate the level of services performed or the costs of such services, our actual
expenses could differ from such estimates. The date on which some services commence, the level of services performed on or before a given date and the cost of such services are often subjective determinations. We make judgments based upon facts and
circumstances known to us in accordance with GAAP.

Income Taxes

Effective January 1, 2007, we adopted FASB issued Interpretation No.48,
Accounting for Uncertainty in Income Taxesan interpretation of FASB
Statement No.109, or
FIN 48
.
FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a
tax return (including a decision whether to file or not file a return in a particular jurisdiction). Under FIN 48, the financial statements reflect expected future tax consequences of such positions presuming the taxing authorities full
knowledge of the position and all relevant facts. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

As a result of implementation of FIN 48, we recognized a decrease of $180 in our liability for uncertain tax positions, which was accounted for as a
decrease to the January 1, 2007 accumulated deficit. We do not have any unrecognized tax benefits as of the date of adoption or June 30, 2007. We review all tax positions to ensure the tax treatment selected is sustainable based on its
technical merits and that the position would be sustained if challenged.

Results of Operations

Results of operations may vary from period to period depending on numerous factors, including the timing of payments received under existing or future
strategic alliances, joint ventures or financings, if any, the progress of our research and development projects, technological advances and determinations as to the commercial potential of proposed products.

Revenue
. Revenue was $1.2 million and $2.2 million for the three months ended June 30, 2007 and 2006, respectively. The decrease in revenue in
2007 is primarily due to a significant change in the estimate of our remaining performance obligations as of December 31, 2006, under our collaboration with Gilead. In February 2007, we announced our decision to discontinue further development
of ACH-806, and we revised our research program with Gilead to focus on next-generation NS4A antagonists. Although ACH-806 demonstrated positive antiviral activity in human patients infected with HCV, it also demonstrated early signs of elevated
serum creatinine, a marker of kidney function. As a result, we expect that our efforts under the collaboration, which were previously estimated to be complete in March 2007, will extend through 2008. In addition, in March 2007, we and Gilead
Sciences entered into an amendment of our collaboration agreement pursuant to which we continue to equally share external costs, but effective April 1, 2007, each party bears the costs of its respective full-time equivalents and other internal
costs. Accordingly, the period over which we recognize amounts received under the collaboration has been extended, reducing revenue for the three month period ended June 30, 2007. Additionally, efforts under our Small Business Innovation
Research, or SBIR, grant were completed in the first quarter of 2007. No additional grant revenue related to this grant will be recognized.

Three Months Ended June 30,

2007

2006

Change

(in thousands)

Amortization of up-front and milestone payments

$

722

$

1,312

$

(590

)

Cost-sharing revenue

473

786

(313

)

Grant revenue



69

(69

)

Total revenue

$

1,195

$

2,167

$

(972

)

Through the completion of our performance obligations, anticipated to be in 2008, we expect to
recognize additional revenue of approximately $3.6 million, offset by any payments we are obligated to make to Gilead Sciences in satisfaction of external costs paid by Gilead Sciences under our external cost-sharing arrangement. It is possible that
we will recognize negative revenue in future quarters based upon the timing of our performance under the collaboration, and on the timing and magnitude of external costs borne by Gilead Sciences.

Research and development expenses
. Research and development expenses were $7.7 million and $4.9 million for the three months ended June 30,
2007 and 2006, respectively. The approximate $2.9 million increase from 2006 to 2007 was the result of: (i) increased personnel costs for our research and development staff, combined with increased non-cash stock based compensation,
(ii) the costs associated with conducting three clinical trials with elvucitabine during 2007, which had longer duration and greater number of patients than those conducted in the same period in 2006, (iii) the costs associated with
additional preclinical testing of ACH-702. We expect that research and development expenses will continue to increase as we complete our phase II clinical program for elvucitabine, enter human clinical trials for ACH-702 and continue our preclinical
and research work for our NS4A antagonists. Research and development expenses for the three months ended June 30, 2007 and 2006 are comprised as follows:

General and administrative expenses
. General and administrative expenses were $1.7 million and
$1.1 million for the three months ended June 30, 2007 and 2006, respectively. The $0.6 million increase from 2006 to 2007 was primarily due to increased non-cash stock based compensation, combined with increased professional fees related to
certain market studies. We expect that general and administrative expenses will increase in the future due to increased payroll, expanded infrastructure, increased consulting, legal, accounting and investor relations expenses associated with being a
public company. General and administrative expenses for the three months ended June 30, 2007 and 2006 are comprised as follows:

Three Months Ended June 30,

2007

2006

Change

(in thousands)

Personnel costs

$

482

$

505

$

(23

)

Stock based compensation

266

96

170

Professional and consulting fees

530

256

274

Facilities costs

302

157

145

Travel and other costs

143

82

61

Total

$

1,723

$

1,096

$

627

Interest income (expense
). Interest income was $666,000 and $195,000 for the three months
ended June 30, 2007 and 2006, respectively. The $471,000 increase from 2006 to 2007 was primarily due to increased average cash balances due to the receipt of $18.4 million in proceeds from our Series C-2 financing in March and May of 2006 and
$53.4 million in net proceeds from our initial public offering in October 2006. Interest expense was $242,000 and $257,000 for the three months ended June 30, 2007 and 2006, respectively.

Tax benefit
. The State of Connecticut provides companies with the opportunity to forego certain research and development tax credit carryforwards
in exchange for cash. The program provides for such exchange of the research and development credits at a rate of 65% of the annual incremental and non-incremental research and development credits, as defined. The amount of tax benefit we recognized
in connection with this exchange program was $170,000 and $25,000 for the three months ended June 30, 2007 and 2006, respectively. The $145,000 increase from 2006 to 2007 was due to the anticipated overall incremental increase in research and
development costs for the year, resulting primarily from the lack of reimbursement for internal full-time equivalent costs from Gilead Sciences, under our amended agreement which was effective April 1, 2007.

Accretion of preferred stock dividends
. Accretion of preferred stock dividends was $1.3 million
for the three months ended June 30, 2006. Following the conversion of our preferred stock into common stock in connection with our initial public offering, there was no further accretion of dividends.

Comparison of Six Months Ended June 30, 2007 and 2006

Revenue
. Revenue was $2.7 million and $4.3 million for the six months ended June 30, 2007 and 2006, respectively. The decrease in revenue in 2007 is primarily due to a significant change in estimate of our
remaining performance obligations as of December 31, 2006, under our collaboration with Gilead. Additionally, efforts under our Small Business Innovation Research, or SBIR, grant were completed and $35,000 was recognized in the first quarter of
2007. No additional grant revenue related to this grant will be recognized.

Six Months Ended June 30,

2007

2006

Change

(in thousands)

Amortization of up-front and milestone payments

$

1,475

$

2,500

$

(1,025

)

Cost-sharing revenue

1,235

1,660

(425

)

Grant revenue

35

158

(123

)

Total revenue

$

2,745

$

4,318

$

(1,573

)

Through the completion of our performance obligations, anticipated to be in 2008, we expect to
recognize additional revenue of approximately $3.6 million, offset by any payments we are obligated to make to Gilead in satisfaction of external costs paid by Gilead Sciences under our external cost-sharing arrangement. It is possible that we will
recognize negative revenue in future quarters based upon the timing of our performance under the collaboration, and on the timing and magnitude of external costs borne by Gilead Sciences.

Research and development expenses
. Research and development expenses were $16.1 million and $11.0 million for the six months ended June 30,
2007 and 2006, respectively. The approximate $5.0 million increase from 2006 to 2007 was the result of: (i) increased personnel costs for our research and development staff, combined with increased non-cash stock based compensation,
(ii) the costs associated with three clinical trials with elvucitabine during 2007, which had longer duration and greater number of patients than those conducted in the same period in 2006, and (iii) the costs associated with additional
preclinical testing of ACH-702. We expect that research and development expenses will continue to increase as we complete our phase II clinical program for elvucitabine, enter human clinical trials for ACH-702 and continue our preclinical and
research work for our NS4A antagonists. Research and development expenses for the six months ended June 30, 2007 and 2006 are comprised as follows:

General and administrative expenses
. General and administrative expenses were $3.3 million and
$2.3 million for the six months ended June 30, 2007 and 2006, respectively. The $1 million increase from 2006 to 2007 was primarily due to increased non-cash stock based compensation, combined with increased professional fees related to certain
market studies, and increased insurance premiums. We expect that general and administrative expenses will increase in the future due to increased payroll, expanded infrastructure, increased consulting, legal, accounting and investor relations
expenses associated with being a public company. General and administrative expenses for the six months ended June 30, 2007 and 2006 are comprised as follows:

Six Months Ended June 30,

2007

2006

Change

(in thousands)

Personnel costs

$

1,010

$

995

$

15

Stock based compensation

519

207

322

Professional and consulting fees

866

602

264

Facilities costs

567

350

217

Travel and other costs

309

162

147

Total

$

3,271

$

2,316

$

955

Interest income (expense
). Interest income was $1.4 million and $267,000 for the six months
ended June 30, 2007 and 2006, respectively. The $1.1 million increase from 2006 to 2007 was primarily due to increased average cash balances due to the receipt of $18.4 million in proceeds from our Series C-2 financing in March and May of 2006
and $53.4 million in net proceeds from our initial public offering in October 2006. Interest expense was $506,000 and $446,000 for the six months ended June 30, 2007 and 2006, respectively. The $60,000 increase from 2006 to 2007 was primarily
attributable to a draw down from the 2005 credit facility in May 2006.

Tax benefit
. The State of Connecticut provides companies
with the opportunity to forego certain research and development tax credit carryforwards in exchange for cash. The program provides for such exchange of the research and development credits at a rate of 65% of the annual incremental and
non-incremental research and development credits, as defined. The amount of tax benefit we recognized in connection with this exchange program was $371,000 and $50,000 for the six months ended June 30, 2007 and 2006, respectively. The $321,000
increase from 2006 to 2007 was due to the anticipated overall incremental increase in research and development costs for the year, resulting primarily from the lack of reimbursement for internal full-time equivalent costs from Gilead Sciences, under
our amended agreement which was effective April 1, 2007.

Accretion of preferred stock dividends
. Accretion of preferred stock
dividends was $2.3 million for the six months ended June 30, 2006. Following the conversion of our preferred stock into common stock in connection with our initial public offering, there was no further accretion of dividends.

Liquidity and Capital Resources

Since our inception
in August 1998, we have financed our operations primarily through our initial public offering, the issuance of our convertible preferred stock and borrowings under debt facilities, as well as through receipts from our collaboration with Gilead
Sciences. Through June 30, 2007, we had received approximately $161.2 million in aggregate net proceeds from stock issuances, $18.3 million from Gilead Sciences under our collaboration agreement with them and approximately $16.7 million under
the following debt facilities:

The amounts reflected above represent original maturities under our debt agreements. As of
June 30, 2007, our debt balance due to borrowings is $8.0 million with a weighted average interest rate of 11%.

We had $48.5 million
and $62.6 million in cash, cash equivalents and marketable securities as of June 30, 2007 and December 31, 2006, respectively.

Cash used in operating activities was $14.0 million for the six months ended June 30, 2007 and was primarily attributable to our $15.3 million net loss, primarily offset by a decrease in working capital and non-cash charges related to
depreciation, amortization and non-cash stock based compensation. Cash used in operating activities was $10.3 million for the six months ended June 30, 2006 and was primarily attributable to our $9.2 million net loss and our $2.5 million
decrease in deferred revenue, partially offset by non-cash charges such as depreciation, amortization and non-cash stock compensation expense combined with our increase in prepaid expenses.

Cash provided by investing activities was $1.6 million for the six months ended June 30, 2007 and was primarily attributable to the maturities of
marketable securities offset by purchases of marketable securities and capital improvements. Cash used in investing activities for the six months ended June 30, 2006 was $10 which was attributable to the purchase of capital equipment.

Cash used in financing activities was $752,000 for the six months ended June 30, 2007 and was primarily attributable to $1.8 million
used for repayments of debt offset by $800,000 in proceeds under our credit facility. Cash provided by financing activities was $20.9 million for the six months ended June 30, 2006 and was primarily attributable to the receipt of $18.2 million
in net proceeds from the sale of series C-2 convertible preferred stock and the receipt of $5.0 million in borrowings under our credit facility, primarily offset by cash used for repayments of debt.

We expect to incur continuing and increasing losses from operations for at least the next several years as we seek to:

We do not expect our existing capital resources, together with the milestone payments and research and development funding we expect to receive, to be sufficient to fund the completion of the development of any of our drug candidates. As a
result, we expect that we will need to raise additional funds prior to being able to market any drug candidates, to, among other things, obtain regulatory approvals, fund operating losses, and, if deemed appropriate, establish manufacturing and
sales and marketing capabilities. We will seek to raise such additional financing through public or private equity or debt financings, collaborative or other arrangements with third parties or through other sources of financing.

We believe that our existing cash and cash equivalents, as supplemented by research funding pursuant to our collaboration with Gilead Sciences, will be
sufficient to meet our projected operating requirements for at least the next twelve months. However, our funding requirements may change and will depend upon numerous factors, including but not limited to:



the progress of our research and development programs;



the timing and results of preclinical testing and clinical studies;



the receipt and timing of regulatory approvals, if any;



determinations as to the commercial potential of our proposed products;



the status of competitive products;



our ability to establish and maintain collaborative arrangements with others for the purpose of funding certain research and development programs;



the acquisition of technologies or drug candidates; and



our participation in the manufacture, sale and marketing of any approved drugs.

We received net proceeds of $53.4 million from our initial public offering. As of June 30, 2007 approximately $18.1 million of the net proceeds of
the offering had been used to fund operations, approximately $471,000 had been used for the purchase of fixed assets and approximately $2.3 million had been used for debt repayments. The remaining net proceeds are invested in U.S. Government and
Agency securities.

We anticipate that we will augment our cash balance through financing transactions, including the issuance of debt or
equity securities and further corporate alliances. No arrangements have been entered into for any future financing, and there can be no assurance that we will be able to obtain adequate levels of additional funding or favorable terms, if at all. If
adequate funds are not available, we may be required to:



delay, reduce the scope of or eliminate our research and development programs;

obtain funds through arrangements with collaborators or others on terms unfavorable to us or that may require us to relinquish rights to certain drug candidates
that we might otherwise seek to develop or commercialize independently; and/or



pursue merger or acquisition strategies.

Additionally, any future equity funding may dilute the ownership of our equity investors.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred
to as structured finance or special purpose entities.

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No.157,
Fair Value Measurements.
SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The standard is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. We do not believe that its adoption in the first quarter of 2008 will have a material impact on our financial statements.

In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities
. SFAS No. 159 permits an entity to elect to report many financial assets and
liabilities at fair value. Entities electing the fair value option would be required to recognize changes in fair value in earnings and are required to distinguish, on the face of the statement of financial position, the fair value of assets and
liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. The initial adjustment to reflect the difference between the fair value and the carrying amount would be
accounted for as a cumulative-effect adjustment to retained earnings as of the date of initial adoption. SFAS No. 159 is effective as of the beginning of an entitys first fiscal year beginning after November 15, 2007. We are
currently evaluating the impact, if any, of FAS 159 on our Financial Statements.

In June 2007, the EITF reached a consensus on EITF Issue
No. 07-03,
Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities
. EITF 07-03 concludes that non-refundable advance payments for future research and development
activities should be deferred and capitalized until the goods have been delivered or the related services have been performed. If an entity does not expect the goods to be delivered or services to be rendered, the capitalized advance payment should
be charged to expense. This consensus is effective for fiscal years beginning after December 15, 2007. The initial adjustment to reflect the effect of applying the consensus as a change in accounting principle would be accounted for as a
cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. We do not believe that our adoption in the first quarter of 2008 will have a material impact on our financial statements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk.
Our exposure to market risk is confined to our cash, cash equivalents and marketable securities. We invest in high-quality financial instruments, primarily money market funds, federal agency notes, asset backed
securities, corporate debt securities and U.S. treasury notes, with the effective duration of the portfolio less than six months and no security with an effective duration in excess of 12 months, which we believe are subject to limited credit risk.
We currently do not hedge interest rate exposure. Due to the short-term nature of our investments, we do not believe that we have any material exposure to interest rate risk arising from our investments.

Capital Market Risk
. We currently have no product revenues and depend on funds raised through
other sources. One source of funding is through further equity offerings. Our ability to raise funds in this manner depends upon capital market forces affecting our stock price.

ITEM 4.

CONTROLS AND PROCEDURES

Our management, with the
participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2007. The term disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive
and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2007,
our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

No change in our internal control over financial reporting (as defined in Rules 13a15(d) and 15d15(d) under the Exchange Act) occurred
during the fiscal quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A.

RISK FACTORS

You should carefully consider the
risks described below in addition to the other information contained in this report, before making an investment decision. Our business, financial condition or results of operations could be harmed by any of these risks. The risks and uncertainties
described below are not the only ones we face. Additional risks not currently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations. We have not made any
material changes to the risk factors previously disclosed in our Annual Report on Form-K for the fiscal year ended December 31, 2006.

Risks
Related to Our Business

We have a limited operating history and have incurred a cumulative loss since inception. If we do not generate significant
revenues, we will not be profitable.

We have incurred significant losses since our inception in August 1998. At June 30, 2007,
our accumulated deficit was approximately $139 million. We have not generated any revenue from the sale of drug candidates to date. We expect that our annual operating losses will increase substantially over the next several years as we expand our
research, development and commercialization efforts, including:

advancing ACH-702 through preclinical testing, submitting an IND application to the Food and Drug Administration, or FDA, and beginning a phase I clinical trial;



advancing our NS4A antagonist program through clinical candidate nomination, preclinical testing and completion of proof-of-concept; and



continuing to advance our other research and discovery programs in HIV and HCV, and identifying other infectious disease drug candidates.

To become profitable, we must successfully develop and obtain regulatory approval for our drug candidates and
effectively manufacture, market and sell any drug candidates we develop. Accordingly, we may never generate significant revenues and, even if we do generate significant revenues, we may never achieve profitability.

We will need substantial additional capital to fund our operations, including drug candidate development, manufacturing and commercialization. If we do not have or
cannot raise additional capital when needed, we will be unable to develop and commercialize our drug candidates successfully, and our ability to operate as a going concern may be adversely affected.

We believe that our existing cash and cash equivalents will be sufficient to support our current operating plan through at least the next twelve months.
However, our operating plan may change as a result of many factors, including:



the costs involved in the preclinical and clinical development and manufacturing of elvucitabine and ACH-702;



the costs involved in the preclinical and clinical development of NS4A antagonists, certain portions of which we share with Gilead;

our ability to enter into corporate collaborations and the terms and success of these collaborations;



our acquisition and development of new technologies and drug candidates; and



competing technological and market developments currently unknown to us.

If our operating plan changes, we may need additional funds sooner than planned. Such additional financing may not be available when we need it or may
not be available on terms that are favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. If
adequate funds are not available to us on a timely basis, or at all, we may be required to:



terminate or delay preclinical studies, clinical trials or other development activities for one or more of our drug candidates; or

delay our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our drug candidates, if approved for sale.

We may seek additional financing through a combination of private and public equity offerings, debt financings and
collaboration, strategic alliance and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders ownership interest will be diluted, and the terms may
include adverse liquidation or other preferences that adversely affect the rights stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as
incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our
technologies or drug candidates, or grant licenses on terms that are not favorable to us.

We depend heavily on the success of our most advanced drug
candidate, elvucitabine, for the treatment of HIV infection, which is still under development.

We have invested a significant portion
of our efforts and financial resources in the development of our most advanced drug candidate, elvucitabine, for the treatment of HIV infection. Our ability to generate revenues will depend heavily on the successful development and commercialization
of this drug candidate. The commercial success of elvucitabine will depend on several factors, including the following:



our ability to provide acceptable evidence of its safety and efficacy in current and future clinical trials;



receipt of marketing approvals from the FDA and similar foreign regulatory authorities;

launching commercial sales of the drug, whether alone or in collaboration with others; and



acceptance of the drug in the medical community and with third-party payors.

We are currently studying elvucitabine in two phase II clinical trials. One or both of these clinical trials may not be successful, and the results of
our phase II clinical trials, even if positive, may not be necessarily indicative of the results we will obtain in our planned phase III or other subsequent clinical trials that may be required for regulatory approval of this drug candidate. If we
are not successful in commercializing elvucitabine, or are significantly delayed in doing so, our business will be materially harmed.

Our market is
subject to intense competition. If we are unable to compete effectively, our drug candidates may be rendered noncompetitive or obsolete.

We are engaged in segments of the pharmaceutical industry that are highly competitive and rapidly changing. Many large pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and private
research organizations are pursuing the development of novel drugs that target infectious diseases. We face, and expect to continue to face, intense and increasing competition as new products enter the market and advanced technologies become
available. In addition to currently approved drugs, there are a significant number of drugs that are currently under development and may become available in the future for the treatment of HIV infection, chronic hepatitis C and serious
hospital-based bacterial infections. We would expect elvucitabine, ACH-702 and our next NS4A antagonist to compete with the following approved drugs and drug candidates currently under development:



Elvucitabine
. If approved, we would expect elvucitabine to compete with currently approved drugs for the treatment of HIV infection, including Epivir (3TC),
Retrovir (AZT)

and Ziagen (abacavir), marketed by GlaxoSmithKline, Emtriva (FTC) and Viread (tenofovir), marketed by Gilead Sciences, and Zerit (d4T) and Videx (ddI),
marketed by Bristol-Myers Squibb. Elvucitabine may also compete with NRTI drug candidates currently in clinical development by other companies such as Avexa, Medivir, Pharmasset and Koronis, as well as other classes of drugs currently in clinical
development by companies such as Abbott, Boehringer Ingelheim, Johnson & Johnson, Merck, Panacos, Pfizer, Roche, Schering-Plough, Trimeris and Vertex.



ACH-702
. If approved, we would expect ACH-702 to compete with currently approved drugs for the treatment of bacterial infections, including Cubicin
(daptomycin), marketed by Cubist Pharmaceuticals, Zyvox (linezolid), marketed by Pfizer, and Synercid (dalfopristin + quinupristin), marketed by King Pharmaceuticals. ACH-702 may also compete with drug candidates currently in clinical development by
other companies such as Intermune, Theravance, Basilea and Johnson & Johnson.



NS4A Antagonist
. If approved, we would expect our next NS4A antagonist to compete with currently approved drugs for the treatment of chronic hepatitis C,
including Pegasys and Roferon-A, marketed by Roche, and Intron-A and Peg-Intron, marketed by Schering-Plough. Our NS4A antagonists may also compete with drug candidates currently in clinical development by other companies such as Abbott, Anadys,
Arrow Pharmaceuticals, Boehringer Ingelheim, Bristol-Myers Squibb, Gilead Sciences, GlaxoSmithKline, Human Genome Sciences, Intermune, Johnson & Johnson, Medivir, Merck, Novartis, Panacos, Pfizer, Pharmasset, Roche, Schering-Plough,
Trimeris, Valeant and Vertex.

Many of our competitors have:



significantly greater financial, technical and human resources than we have and may be better equipped to discover, develop, manufacture and commercialize drug
candidates;

drug candidates that have been approved or are in late-stage clinical development; and/or



collaborative arrangements in our target markets with leading companies and research institutions.

Competitive products may render our products obsolete or noncompetitive before we can recover the expenses of developing and commercializing our drug
candidates. Furthermore, the development of new treatment methods and/or the widespread adoption or increased utilization of any vaccine for the diseases we are targeting could render our drug candidates noncompetitive, obsolete or uneconomical. If
we successfully develop and obtain approval for our drug candidates, we will face competition based on the safety and effectiveness of our drug candidates, the timing of their entry into the market in relation to competitive products in development,
the availability and cost of supply, marketing and sales capabilities, reimbursement coverage, price, patent position and other factors. If we successfully develop drug candidates but those drug candidates do not achieve and maintain market
acceptance, our business will not be successful.

If we are not able to attract and retain key management and scientific personnel and advisors, we may
not successfully develop our drug candidates or achieve our other business objectives.

We depend upon our senior management and
scientific staff for our business success. Key members of our senior team include Michael Kishbauch, our president and chief executive officer and Dr. Milind Deshpande, our executive vice president and chief scientific officer. Many of our
employment

agreements with our senior management employees are terminable without notice by the employee. The loss of the service of any of the key members of our
senior management may significantly delay or prevent the achievement of drug development and other business objectives. Our Senior Vice President and Chief Medical Officer resigned from his position effective May 29, 2007. Our ability to
attract and retain qualified personnel, consultants and advisors is critical to our success. We face intense competition for qualified individuals from numerous pharmaceutical and biotechnology companies, universities, governmental entities and
other research institutions. We may be unable to attract and retain these individuals, and our failure to do so would adversely affect our business.

Our business has a substantial risk of product liability claims. If we are unable to obtain appropriate levels of insurance, a product liability claim could adversely affect our business.

Our business exposes us to significant potential product liability risks that are inherent in the development, manufacturing and sales and marketing of
human therapeutic products. Although we do not currently commercialize any products, claims could be made against us based on the use of our drug candidates in clinical trials. Product liability claims could delay or prevent completion of our
clinical development programs. We currently have clinical trial insurance in an amount equal to up to $9.0 million in the aggregate and will seek to obtain product liability insurance prior to the sales and marketing of any of our drug candidates.
However, our insurance may not provide adequate coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to maintain current amounts of
insurance coverage or obtain additional or sufficient insurance at a reasonable cost to protect against losses that could have a material adverse effect on us. If a claim is brought against us, we might be required to pay legal and other expenses to
defend the claim, as well as uncovered damages awards resulting from a claim brought successfully against us. Furthermore, whether or not we are ultimately successful in defending any such claims, we might be required to direct significant financial
and managerial resources to such defense, and adverse publicity is likely to result.

Risks Related to the Development of Our Drug Candidates

All of our drug candidates are still in the early stages of development and remain subject to clinical testing and regulatory approval. If we are
unable to successfully develop and test our drug candidates, we will not be successful.

To date, we have not commercially marketed,
distributed or sold any drug candidates. The success of our business depends primarily upon our ability to develop and commercialize our drug candidates successfully. Our most advanced drug candidate is elvucitabine, which is currently in phase II
clinical trials. Our other drug candidates are in various stages of preclinical development. Our drug candidates must satisfy rigorous standards of safety and efficacy before they can be approved for sale. To satisfy these standards, we must engage
in expensive and lengthy testing and obtain regulatory approval of our drug candidates. Despite our efforts, our drug candidates may not:



offer therapeutic or other improvement over existing, comparable drugs;



be proven safe and effective in clinical trials;



have the desired effects or may include undesirable effects or the drug candidates may have other unexpected characteristics;



meet applicable regulatory standards;



be capable of being produced in commercial quantities at acceptable costs; or

In addition, we may experience numerous unforeseen events during, or as a result of, preclinical testing
and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our drug candidates, including:



regulators or Institutional Review Boards, or IRBs, may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;



our pre-clinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional
pre-clinical testing or clinical trials, or we may abandon projects that we expect to be promising;



enrollment in our clinical trials may be slower than we currently anticipate or participants may drop out of our clinical trials at a higher rate than we currently
anticipate, resulting in significant delays;



our third party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;



we might have to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;



IRBs or regulators, including the FDA, may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory
requirements; and



the supply or quality of our drug candidates or other materials necessary to conduct our clinical trials may be insufficient or inadequate.

We, and a number of other companies in the pharmaceutical and biotechnology industries, have suffered significant
setbacks in late-stage clinical trials even after achieving promising results in early-stage development. In February 2007, we announced that we were discontinuing further clinical development of ACH-806 (also known as GS-9132) which was determined
to have positive antiviral effect in a proof-of-concept clinical trial in HCV infected patients, but also to elevate serum creatinine levels, a marker of kidney function. Accordingly, the results from the completed preclinical studies and clinical
trials and ongoing clinical trials for elvucitabine, ACH-702 and our other drug candidates may not be predictive of the results we may obtain in later stage trials. We do not expect any of our drug candidates to be commercially available for at
least several years.

If we are unable to obtain U.S. and/or foreign regulatory approval, we will be unable to commercialize our drug candidates.

Our drug candidates are subject to extensive governmental regulations relating to among other things, research, testing, development,
manufacturing, safety, efficacy, record keeping, labeling, marketing and distribution of drugs. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are required in the United States and in many foreign
jurisdictions prior to the commercial sale of our drug candidates. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. It is possible that none of the drug candidates we
are developing will obtain marketing approval. In connection with the clinical trials for elvucitabine, ACH-702 and any other drug candidate we may seek to develop in the future, we face risks that:

the results may not confirm the positive results from earlier preclinical studies or clinical trials; and



the results may not meet the level of statistical significance required by the FDA or other regulatory agencies.

We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA. The
time required to complete clinical trials and for FDA and other countries regulatory review processes is uncertain and typically takes many years. Our analysis of data obtained from preclinical and clinical activities is subject to
confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unanticipated delays or increased costs due to government regulation from future legislation or administrative
action or changes in FDA policy during the period of product development, clinical trials and FDA regulatory review.

Any delay in
obtaining or failure to obtain required approvals could materially adversely affect our ability to generate revenues from the particular drug candidate. Furthermore, any regulatory approval to market a product may be subject to limitations on the
indicated uses for which we may market the product and affect reimbursement by third-party payors. These limitations may limit the size of the market for the product. We are also subject to numerous foreign regulatory requirements governing the
conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process includes all of the risks associated with FDA approval described above as well as risks
attributable to the satisfaction of foreign regulations. Approval by the FDA does not ensure approval by regulatory authorities outside the United States. Foreign jurisdictions may have different approval procedures than those required by the FDA
and may impose additional testing requirements for our drug candidates.

If clinical trials for our drug candidates are prolonged or delayed, we may be
unable to commercialize our drug candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any product revenue.

We cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical trials that will cause us or regulatory authorities to delay, suspend or terminate clinical trials, or delay
the analysis of data from our completed or ongoing clinical trials. Any of the following could delay the clinical development of our drug candidates:



ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;



delays in receiving, or the inability to obtain, required approvals from institutional review boards or other reviewing entities at clinical sites selected for
participation in our clinical trials;



delays in enrolling volunteers and patients into clinical trials;



a lower than anticipated retention rate of volunteers and patients in clinical trials;



the need to repeat clinical trials as a result of inconclusive or negative results or unforeseen complications in testing;

serious and unexpected drug-related side effects experienced by participants in our clinical trials; or



the placement by the FDA of a clinical hold on a trial.

Our ability to enroll patients in our clinical trials in sufficient numbers and on a timely basis will be subject to a number of factors, including the size of the patient population, the nature of the protocol, the
proximity of patients to clinical sites, the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial. Delays in patient enrollment may result in increased costs and longer development times.
For example, we are experiencing and may continue to experience delays in patient enrollment in connection with our phase II trial of elvucitabine in HIV infected patients who have failed a highly active anti retroviral therapy, or HAART, regimen
which included Epivir (3TC) due to the strict entry criteria for this trial. As a result, we expanded the number of sites at which the trial will be conducted and changed the protocol of the trial to include additional treatment with
elvucitabine after the initial 14 days of treatment. We cannot assure you that these actions will prevent further delays in patient enrollment in connection with this trial. In addition, subjects may drop out of our clinical trials, and thereby
impair the validity or statistical significance of the trials.

We, the FDA or other applicable regulatory authorities or IRBs may suspend
clinical trials of a drug candidate at any time if we or they believe the subjects or patients participating in such clinical trials are being exposed to unacceptable health risks or for other reasons.

We cannot predict whether any of our drug candidates will encounter problems during clinical trials which will cause us or regulatory authorities to
delay or suspend these trials, or which will delay the analysis of data from these trials. In addition, it is impossible to predict whether legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed,
or what the impact of such changes, if any, may be. If we experience any such problems, we may not have the financial resources to continue development of the drug candidate that is affected or the development of any of our other drug candidates.

In addition, we, along with our collaborators or subcontractors, may not employ, in any capacity, persons who have been debarred under the
FDAs Application Integrity Policy. Employment of such a debarred person (even if inadvertently) may result in delays in FDAs review or approval of our products, or the rejection of data developed with the involvement of such persons.

Even if we obtain regulatory approvals, our drug candidates will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and
applicable foreign regulations, we could lose those approvals, and our business would be seriously harmed.

Even if we receive
regulatory approval of any drugs we are developing or may develop, we will be subject to continuing regulatory review, including the review of clinical results which are reported after our drug candidates become commercially available approved
drugs. As greater numbers of patients use a drug following its approval, side effects and other problems may be observed after approval that were not seen or anticipated during pre-approval clinical trials. In addition, the manufacturer, and the
manufacturing facilities we use to make any approved drugs, will also be subject to periodic review and inspection by the FDA. The subsequent discovery of previously unknown problems with the drug, manufacturer or facility may result in restrictions
on the drug, manufacturer or facility, including withdrawal of the drug from the market. If we fail to comply with applicable continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approval, product
recalls and seizures, operating restrictions and criminal prosecutions.

Our product promotion and advertising is also subject to
regulatory requirements and continuing regulatory review. In particular, the marketing claims we will be permitted to make in labeling or

advertising regarding our marketed products will be limited by the terms and conditions of the FDA-approved labeling. We must submit copies of our
advertisements and promotional labeling to the FDA at the time of initial publication or dissemination. If the FDA believes these materials or statements promote our products for unapproved indications, or with unsubstantiated claims, or if we fail
to provide appropriate safety-related information, the FDA could allege that our promotional activities misbrand our products. Specifically, the FDA could issue an untitled letter or warning letter, which may demand, among other things, that we
cease such promotional activities and issue corrective advertisements and labeling. The FDA also could take enforcement action including seizure of allegedly misbranded product, injunction or criminal prosecution against us and our officers or
employees. If we repeatedly or deliberately fail to submit such advertisements and labeling to the agency, the FDA could withdraw our approvals. Moreover, the Department of Justice can bring civil or criminal actions against companies that promote
drugs or biologics for unapproved uses, based on the False Claims Act and other federal laws governing reimbursement for such products under the Medicare, Medicaid and other federally supported healthcare programs. Monetary penalties in such cases
have often been substantial, and civil penalties can include costly mandatory compliance programs and exclusion from federal healthcare programs.

If we
do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.

Our research and development efforts involve the controlled use of hazardous materials, chemicals and various radioactive compounds. Although we believe that our safety procedures for the use, manufacture, storage, handling and disposing of
these materials comply with the standards prescribed by federal, state and local laws and regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for
resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of
biohazardous materials. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. Although we maintain workers compensation insurance to cover us for costs we may incur due to injuries to
our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. Due to the small amount of hazardous materials that we generate, we have determined that the cost to secure
insurance coverage for environmental liability and toxic tort claims far exceeds the benefits. Accordingly, we do not maintain any insurance to cover pollution conditions or other extraordinary or unanticipated events relating to our use and
disposal of hazardous materials. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.

Risks Related to Commercialization of Our Drug Candidates

If we are unable to establish sales and marketing capabilities or enter into
agreements with third parties to market and sell our drug candidates, we may not generate product revenue.

We have no commercial
products, and we do not currently have an organization for the sales and marketing of pharmaceutical products. In order to successfully commercialize any drugs that may be approved in the future by the FDA or comparable foreign regulatory
authorities, we must build our sales and marketing capabilities or make arrangements with third parties to perform these services. For certain drug candidates in selected indications where we believe that an approved product could be commercialized
by a specialty sales force in North America that calls on a limited but focused group of physicians, we intend to commercialize these products ourselves. However, in therapeutic indications that require a large sales force selling to a large and
diverse prescribing population and for markets outside of North America, we plan to enter into arrangements with other companies for commercialization. For example, we have entered into an agreement with Gilead Sciences for the development and
commercialization of certain of our HCV candidates involving NS4A antagonism. If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate product
revenue and may not become profitable.

If physicians and patients do not accept our future drugs, we may be unable to generate significant revenue, if any.

Even if elvucitabine and ACH-702, or any other drug candidates we may develop or acquire in the future, obtain regulatory approval,
they may not gain market acceptance among physicians, health care payors, patients and the medical community. Factors that we believe could materially affect market acceptance of our product candidates include:



the timing of market introduction of competitive drugs;



the demonstrated clinical safety and efficacy of our product candidates compared to other drugs;



the cost-effectiveness of our product candidates;



the availability of reimbursement from managed care plans and other third-party payors;



the convenience and ease of administration of our product candidates;



the existence, prevalence and severity of adverse side effects;



other potential advantages of alternative treatment methods; and



the effectiveness of marketing and distribution support.

If our approved drugs fail to achieve market acceptance, we would not be able to generate significant revenue.

If
third-party payors do not adequately reimburse patients for any of our drug candidates that are approved for marketing, they might not be purchased or used, and our revenues and profits will not develop or increase.

Our revenues and profits will depend significantly upon the availability of adequate reimbursement for the use of any approved drug candidates from
governmental and other third-party payors, both in the United States and in foreign markets. Reimbursement by a third party may depend upon a number of factors, including the third-party payors determination that use of a product is:



a covered benefit under its health plan;



safe, effective and medically necessary;



appropriate for the specific patient;



cost effective; and



neither experimental nor investigational.

Obtaining reimbursement approval for a product from each third-party and government payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of any
approved drugs to each payor. We may not be able to provide data sufficient to gain acceptance with respect to reimbursement. There also exists substantial uncertainty concerning third-party reimbursement for the use of any drug candidate
incorporating new technology, and even if determined eligible, coverage may be more limited than the purposes for which the drug is

approved by the FDA. Moreover, eligibility for coverage does not imply that any drug will be reimbursed in all cases or at a rate that allows us to make a
profit or even cover our costs. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in
which it is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare
or Medicaid data used to calculate these rates. Net prices for products may be reduced by mandatory discounts or rebates required by government health care programs or by any future relaxation of laws that restrict imports of certain medical
products from countries where they may be sold at lower prices than in the United States.

There have been, and we expect that there will
continue to be, federal and state proposals to constrain expenditures for medical products and services, which may affect payments for any of our approved products. The Centers for Medicare and Medicaid Services frequently change product
descriptors, coverage policies, product and service codes, payment methodologies and reimbursement values. Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates and may have
sufficient market power to demand significant price reductions. As a result of actions by these third-party payors, the health care industry is experiencing a trend toward containing or reducing costs through various means, including lowering
reimbursement rates, limiting therapeutic class coverage and negotiating reduced payment schedules with service providers for drug products.

Our inability to promptly obtain coverage and profitable reimbursement rates from government-funded and private payors for any approved products could have a material adverse effect on our operating results and our overall financial
condition.

Recent federal legislation will increase the pressure to reduce prices of pharmaceutical products paid for by Medicare, which could
adversely affect our revenues, if any.

The Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA, changes the
way Medicare will cover and pay for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and eventually will introduce a new reimbursement methodology based on average sales prices for drugs. In
addition, this legislation provides authority for limiting the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be
additional pressure to contain and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products and could seriously harm our business. While
the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may
result in a similar reduction in payments from private payors.

Risks Related to Our Dependence on Third Parties

We may not be able to execute our business strategy if we are unable to enter into alliances with other companies that can provide capabilities and funds for the
development and commercialization of our drug candidates. If we are unsuccessful in forming or maintaining these alliances on favorable terms, our business may not succeed.

We have entered into a collaboration arrangement with Gilead Sciences for the development and commercialization of certain of our HCV compounds involving
NS4A antagonism, and we may enter into additional collaborative arrangements in the future. For example, we may enter into alliances with major biotechnology or pharmaceutical companies to jointly develop specific drug candidates and to jointly

commercialize them if they are approved. In such alliances, we would expect our biotechnology or pharmaceutical collaborators to provide substantial funding,
as well as significant capabilities in clinical development, regulatory affairs, marketing and sales. We may not be successful in entering into any such alliances on favorable terms, if at all. Even if we do succeed in securing such alliances, we
may not be able to maintain them if, for example, development or approval of a drug candidate is delayed or sales of an approved drug are disappointing. Furthermore, any delay in entering into collaboration agreements could delay the development and
commercialization of our drug candidates and reduce their competitiveness even if they reach the market. Any such delay related to our collaborations could adversely affect our business.

If a collaborative partner terminates or fails to perform its obligations under agreements with us, the development and commercialization of our drug candidates could be delayed or terminated.

If Gilead Sciences or another, future collaborative partner does not devote sufficient time and resources to collaboration arrangements with us, we may
not realize the potential commercial benefits of the arrangement, and our results of operations may be adversely affected. In addition, if any existing or future collaboration partner were to breach or terminate its arrangements with us, the
development and commercialization of the affected drug candidate could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue development and commercialization of the drug candidate on
our own. Under our collaboration agreement with Gilead Sciences, Gilead Sciences may terminate the collaboration for any reason at any time upon 120 days notice. If Gilead Sciences were to exercise this right, the development and commercialization
of our HCV compounds would be adversely affected.

Much of the potential revenue from our existing and future collaborations will consist
of contingent payments, such as payments for achieving development milestones and royalties payable on sales of drugs developed. The milestone and royalty revenues that we may receive under these collaborations will depend upon our
collaborators ability to successfully develop, introduce, market and sell new products. In addition, our collaborators may decide to enter into arrangements with third parties to commercialize products developed under our existing or future
collaborations using our technologies, which could reduce the milestone and royalty revenue that we may receive, if any. In many cases we will not be involved in these processes and accordingly will depend entirely on our collaborators. Our
collaboration partners may fail to develop or effectively commercialize products using our products or technologies because they:



decide not to devote the necessary resources due to internal constraints, such as limited personnel with the requisite scientific expertise, limited cash resources
or specialized equipment limitations, or the belief that other drug development programs may have a higher likelihood of obtaining regulatory approval or may potentially generate a greater return on investment;



do not have sufficient resources necessary to carry the drug candidate through clinical development, regulatory approval and commercialization; or



cannot obtain the necessary regulatory approvals.

In addition, a collaborator may decide to pursue a competitive drug candidate developed outside of the collaboration. In particular, Gilead Sciences, our collaborator for our chronic hepatitis C program, currently is
developing other products for the treatment of chronic hepatitis C, and the results of its development efforts could affect its commitment to our drug candidate. If our collaboration partners fail to develop or effectively commercialize drug
candidates or drugs for any of these reasons, we may not be able to replace the collaboration partner with another partner to develop and commercialize a drug candidate or drugs under the terms of the collaboration. We may also be unable to obtain,
on terms acceptable to us, a license from such collaboration partner to any of its intellectual property that may be necessary or useful for us to continue to develop and commercialize a drug candidate.

We rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily,
including failing to meet established deadlines for the completion of such trials.

We do not have the ability to independently conduct
clinical trials for our drug candidates, and we rely on third parties such as contract research organizations, medical institutions and clinical investigators to enroll qualified patients and conduct our clinical trials. Our reliance on these third
parties for clinical development activities reduces our control over these activities. Accordingly, these third-party contractors may not complete activities on schedule, or may not conduct our clinical trials in accordance with regulatory
requirements or our trial design. To date, we believe our contract research organizations and other similar entities with which we are working have performed well. However, if these third parties do not successfully carry out their contractual
duties or meet expected deadlines, we may be required to replace them. Although we believe that there are a number of other third-party contractors we could engage to continue these activities, it may result in a delay of the affected trial.
Accordingly, our efforts to obtain regulatory approvals for and commercialize our drug candidates may be delayed.

We currently depend on third-party
manufacturers to produce our preclinical and clinical drug supplies and intend to rely upon third-party manufacturers to produce commercial supplies of any approved drug candidates. If in the future we manufacture any of our drug candidates, we will
be required to incur significant costs and devote significant efforts to establish and maintain these capabilities.

We have relied
upon third parties to produce material for preclinical and clinical testing purposes and intend to continue to do so in the future. We also expect to rely upon third parties to produce materials required for the commercial production of our drug
candidates if we succeed in obtaining necessary regulatory approvals. If we are unable to arrange for third-party manufacturing, or to do so on commercially reasonable terms, we may not be able to complete development of our drug candidates or
market them. Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured drug candidates ourselves, including reliance on the third party for regulatory compliance and quality assurance, the possibility of
breach of the manufacturing agreement by the third party because of factors beyond our control and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or
damaging to us. In addition, the FDA and other regulatory authorities require that our drug candidates be manufactured according to current good manufacturing practice regulations. Any failure by us or our third-party manufacturers to comply with
current good manufacturing practices and/or our failure to scale up our manufacturing processes could lead to a delay in, or failure to obtain, regulatory approval of any of our drug candidates. In addition, such failure could be the basis for
action by the FDA to withdraw approvals for drug candidates previously granted to us and for other regulatory action.

We currently rely on
a single manufacturer for the preclinical and clinical supplies of each of our drug candidates and do not currently have relationships for redundant supply or a second source for any of our drug candidates. To date, our third-party manufacturers
have met our manufacturing requirements, but we cannot assure you that they will continue to do so. Any performance failure on the part of our existing or future manufacturers could delay clinical development or regulatory approval of our drug
candidates or commercialization of any approved products. If for some reason our current contract manufacturers cannot perform as agreed, we may be required to replace them. Although we believe there are a number of potential replacements as our
manufacturing processes are not manufacturer specific, we may incur added costs and delays in identifying and qualifying any such replacements. Furthermore, although we generally do not begin a clinical trial unless we believe we have a sufficient
supply of a drug candidate to complete the trial, any significant delay in the supply of a drug candidate for an ongoing trial due to the need to replace a third-party manufacturer could delay completion of the trial.

We may in the future elect to manufacture certain of our drug candidates in our own manufacturing
facilities. If we do so, we will require substantial additional funds and need to recruit qualified personnel in order to build or lease and operate any manufacturing facilities.

Risks Related to Patents and Licenses

If we are unable to adequately protect our drug candidates, or if we
infringe the rights of others, our ability to successfully commercialize our drug candidates will be harmed.

As of June 30, 2007,
our patent portfolio included a total of 195 patents and patent applications worldwide. We own or hold exclusive licenses to a total of seven U.S. issued patents and 7 U.S. pending patent applications, as well as 188 pending PCT applications and
foreign counterparts to many of these patents and patent applications. Our success depends in part on our ability to obtain patent protection both in the United States and in other countries for our drug candidates. Our ability to protect our drug
candidates from unauthorized or infringing use by third parties depends in substantial part on our ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability, validity and
enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our ability to maintain, obtain and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights
under any issued patents may not provide us with sufficient protection for our drug candidates or provide sufficient protection to afford us a commercial advantage against competitive products or processes. In addition, we cannot guarantee that any
patents will issue from any pending or future patent applications owned by or licensed to us. Even if patents have issued or will issue, we cannot guarantee that the claims of these patents are or will be valid or enforceable or will provide us with
any significant protection against competitive products or otherwise be commercially valuable to us. Patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however, patent
applications remain confidential in the U.S. Patent and Trademark Office, which we refer to as the U.S. Patent Office, for the entire time prior to issuance as a U.S. patent. Similarly, publication of discoveries in the scientific or patent
literature often lag behind actual discoveries. Consequently, we cannot be certain that we or our licensors or co-owners were the first to invent, or the first to file patent applications on, our drug candidates or their use as anti-infective drugs.
In the event that a third party has also filed a U.S. patent application relating to our drug candidates or a similar invention, we may have to participate in interference proceedings declared by the U.S. Patent Office to determine priority of
invention in the United States. The costs of these proceedings could be substantial and it is possible that our efforts would be unsuccessful, resulting in a loss of our U.S. patent position. Furthermore, we may not have identified all U.S. and
foreign patents or published applications that affect our business either by blocking our ability to commercialize our drugs or by covering similar technologies that affect our drug market.

The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States and many companies have
encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. If we encounter such difficulties in protecting or are otherwise precluded from effectively protecting our intellectual property rights in foreign
jurisdictions, our business prospects could be substantially harmed.

We license patent rights from third-party owners. If such owners do not properly
maintain or enforce the patents underlying such licenses, our competitive position and business prospects will be harmed.

We are party
to a number of licenses that give us rights to third-party intellectual property that is necessary or useful for our business. In particular, we have obtained a sublicense from Vion Pharmaceuticals and a license from Emory University with respect to
elvucitabine. We have also obtained a license from the University of Maryland for drug discovery technology. We may enter into additional licenses to third-party intellectual property in the future. Our success will depend in part on the ability of
our licensors to obtain, maintain and enforce patent protection for their intellectual property, in particular,

those patents to which we have secured exclusive rights. Our licensors may not successfully prosecute the patent applications to which we are licensed. Even
if patents issue in respect of these patent applications, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue such litigation less
aggressively than we would. In addition, our licensors may terminate their agreements with us in the event we breach the applicable license agreement and fail to cure the breach within a specified period of time. Without protection for the
intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects.

Litigation regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are involved in such litigation, it could
cause delays in bringing drug candidates to market and harm our ability to operate.

Our success will depend in part on our ability to
operate without infringing the proprietary rights of third parties. Although we are not currently aware of any litigation or other proceedings or third-party claims of intellectual property infringement related to our drug candidates, the
pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may obtain patents in the future and allege that the use of our technologies infringes these patent claims or
that we are employing their proprietary technology without authorization. Likewise, third parties may challenge or infringe upon our existing or future patents. Under our license agreements with Vion Pharmaceuticals and The University of Maryland,
we have the right, but not an obligation, to bring actions against an infringing third party. If we do not bring an action within a specified number of days, the licensor may bring an action against the infringing party. Pursuant to our license
agreement with Emory University and our research collaboration and license agreement with Gilead Sciences, Emory and Gilead Sciences have the primary right, but not an obligation, to bring actions against an infringing third party. However, if
Gilead Sciences or Emory elects not to bring an action, we may bring an action against the infringing party.

Proceedings involving our patents or patent
applications or those of others could result in adverse decisions regarding:

the enforceability, validity or scope of protection offered by our patents relating to our drug candidates.

Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings,
which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent
litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement
action successfully or have infringed patents declared invalid, we may:

We rely on trade secrets to protect our technology, especially where we do not believe patent protection
is appropriate or obtainable. However, trade secrets are difficult to protect. In order to protect our proprietary technology and processes, we also rely in part on confidentiality and intellectual property assignment agreements with our corporate
partners, employees, consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information nor result in the effective assignment to us of
intellectual property, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information or other breaches of the agreements. In addition, others may independently discover our trade secrets and proprietary
information, and in such case we could not assert any trade secret rights against such party. Enforcing a claim that a party illegally obtained and is using our trade secrets is difficult, expensive and time consuming, and the outcome is
unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary rights, and failure to
obtain or maintain trade secret protection could adversely affect our competitive business position.

Risks Relating to Our Common Stock

Our stock price is likely to be volatile, and the market price of our common stock may decline in value in the future.

The market price of our common stock could be subject to significant fluctuations. Market prices for securities of early stage pharmaceutical,
biotechnology and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of our common stock to fluctuate include:



the results of our current phase II and any future clinical trials for elvucitabine;



the results of our research and candidate selection in our HCV program;

The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may adversely affect the trading
price of our common stock.

In the past, following periods of volatility in the market price of a companys securities, stockholders
have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability
and reputation.

Our executive officers, directors and principal stockholders own a large percentage of our voting common stock and could limit our
stockholders influence on corporate decisions or could delay or prevent a change in corporate control.

Our directors, executive
officers and current holders of more than 5% of our outstanding common stock, together with their affiliates and related persons, beneficially own, in the aggregate, approximately 41% of our outstanding common stock. As a result, these stockholders,
if acting together, have substantial influence on the outcome of all matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets
and other extraordinary transactions. The interests of this group of stockholders may not always coincide with our corporate interests or the interest of other stockholders, and they may act in a manner with which you may not agree or that may not
be in the best interests of other stockholders. This concentration of ownership may have the effect of:



delaying, deferring or preventing a change in control of our company;



entrenching our management and/or board;



impeding a merger, consolidation, takeover or other business combination involving our company; or



discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.

Our management is required to devote substantial time and incur additional expense to comply with public company regulations. Our failure to comply with such
regulations could subject us to public investigations, fines, enforcement actions and other sanctions by regulatory agencies and authorities and, as a result, our stock price could decline in value.

As a private company with limited resources, we maintained a small finance and accounting staff. As a public company, the Sarbanes-Oxley Act of 2002 and
the related rules and regulations of the SEC, as well as the rules of the Nasdaq Global Market, now require us to implement additional corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules.
Compliance with these public company obligations will increase our legal and financial compliance costs and place significant additional demands on our finance and accounting staff and on our financial, accounting and information systems.

In particular, as a public company, our management will be required to conduct an annual evaluation of our internal controls over
financial reporting and include a report of management on our

internal controls in our annual reports on Form 10-K. In addition, we will be required to have our independent public accounting firm attest to and report on
managements assessment of the effectiveness of our internal controls over financial reporting. Under current rules, we will be subject to these requirements beginning with our annual report on Form 10-K for our fiscal year ending
December 31, 2007. If we are unable to conclude that we have effective internal controls over financial reporting or, if our independent auditors are unable to provide us with an attestation and an unqualified report as to the effectiveness of
our internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.

We do not anticipate paying cash dividends, and accordingly stockholders must rely on stock appreciation for any return on their investment in us.

We anticipate that we will retain our earnings, if any, for future growth and therefore do not anticipate paying cash dividends in the future. As a
result, only appreciation of the price of our common stock will provide a return to stockholders.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In our initial public offering, or IPO, we sold 4,500,000 shares of common stock, including an over-allotment option of 675,000 shares, pursuant to a registration statement on Form S-1 (File No. 333-132921) that was declared
effective by the SEC on October 25, 2006. We received aggregate net proceeds of approximately $53.4 million, after deducting underwriting discounts and commissions of approximately $4.2 million and expenses of the offering of
approximately $1.9 million. The underwriters of the offering were Cowen and Company, LLC, CIBC World Markets and JMP Securities. The net proceeds have been allocated for general corporate purposes and capital expenditures. As of June 30,
2007 approximately $18.1 million of the net proceeds of the offering had been used to fund operations, including;



approximately $4.5 million of elvucitabine direct costs;



approximately $2.3 million of ACH-702 direct costs;



approximately $1.8 million of NS4A antagonist direct costs;



approximately $6.3 million related to indirect research and development costs; and



approximately $3.2 million related to general and administrative costs.

Additionally, approximately $471,000 was used for the purchase of fixed assets and approximately $2.3 million was used for debt repayments. The remaining net proceeds are invested in U.S. Government and Agency
securities.

On February 9, 2007, we issued an aggregate of 8,307 shares of common stock to General Electric Capital Corporation,
pursuant to the exercise of three warrants held by General Electric Capital Corporation. The warrants were exercised pursuant to a cashless exercise feature by which an aggregate of 15,208 shares of common stock originally issuable under the
warrants were cancelled as payment for the aggregate purchase price. The exercise prices, number of shares originally issuable and the number of shares actually issued under the three individual warrants are set forth below:

The securities described above were issued in reliance upon exemptions from the registration provisions
of the Securities Act of 1933, as amended, set forth in Section 4(2) and Regulation D promulgated thereunder relative to sales by an issuer not involving any public offering. General Electric Capital Corporation represented to us in
connection with its purchase that it was an accredited investor and was acquiring the shares for investment and not distribution, that it could bear the risks of the investment and could hold the securities for an indefinite period of time.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We held our annual meeting of stockholders on June 6, 2007. At the meeting, each of Jean-Francois Formela, James Garvey and David Scheer was re-elected as a class I director for a three-year term to expire in 2010. The additional
directors whose term of office continued after the meeting are Michael Grey, Jason Fisherman, Michael Kishbauch, Robert Van Nostrand and Christopher White. In addition, the stockholders ratified the selection of PricewaterhouseCoopers LLP to serve
as our independent registered public accounting firm for the fiscal year ending December 31, 2007. The number of votes cast for and against or withheld with respect to each matter voted upon at the meeting and the number of abstentions are as
follows:

Nominee

Votes in
Favor

Votes
Withheld

Votes
Against

Votes
Abstained

Election of Directors:

Jean-Francois Formela

11,166,760

71,152





James Garvey

11,199,260

38,652





David Scheer

11,211,760

26,152





Ratification of PricewaterhouseCoopers LLP

11,205,257



1,000

31,655

ITEM 5.

OTHER INFORMATION

On June 28, 2007, in
connection with the Master Security Agreement, dated January 24, 2002 between the Company and General Electric Capital Corporation, as amended and the Master Security Agreement, dated December 30, 2005 between the Company and Oxford
Finance Corporation, we issued promissory notes in the principal amount of $400,000 to each of General Electric Capital Corporation and Oxford Finance Corporation. Each promissory note matures in June 2010 and bears a fixed interest rate of
11.58% per annum. The proceeds from these promissory notes will be used to fund our office and lab expansion project.

ITEM 6.

EXHIBITS

10.1

Promissory Notes and Master Security Agreement by and between the Registrant and Oxford Finance Corporation, dated as of December 30, 2005.

10.2

Promissory Notes and Master Security Agreement by and between the Registrant and GE Capital Corporation, dated as of January 24, 2002, as amended.

31.1

Certification of President and Chief Executive Officer of Achillion Pharmaceuticals, Inc. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

Certification of Chief Financial Officer of Achillion Pharmaceuticals, Inc. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

32.1

Certification of President and Chief Executive Officer of Achillion Pharmaceuticals, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended,
and Section 1350 of Chapter 63 of Title 18 of the United States Code.

32.2

Certification of Chief Financial Officer of Achillion Pharmaceuticals, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and
Section 1350 of Chapter 63 of Title 18 of the United States Code.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

ACHILLION PHARMACEUTICALS, INC.

Date: August 8, 2007

/s/ Michael D. Kishbauch

President and Chief Executive Officer

(Principal Executive Officer)

Date: August 8, 2007

/s/ Mary Kay Fenton

Chief Financial Officer

(Principal Financial and Accounting Officer)

48

Exhibit 10.1

PROMISSORY NOTE

June 28, 2007

FOR VALUE RECEIVED,
Achillion Pharmaceuticals, Inc.
a corporation located at the address stated below
(Maker
) promises, jointly and severally
if more than one, to pay to the order of
Oxford Finance Corporation
or any subsequent holder hereof (each, a
Payee
) at its office located at
133 N. Fairfax Street, Alexandria, VA 22314
or at such other place as Payee
or the holder hereof may designate, the principal sum of
Four Hundred Thousand Dollars ($400,000)
, with interest on the unpaid principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of
Eleven and Fifty-Eight One Hundredths percent (11.58%) per annum, to be paid in lawful money of the United States, in Thirty-Six (36) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Thirty-Five (35)

$

13,205.63

(each such installment, a Periodic Installment) and a final installment which shall be in the amount
of the total outstanding principal and interest. The first Periodic Installment shall be due and payable on or about August 1, 2007, and the following Periodic Installments and the final installment shall be due and payable on the first day of
each succeeding month beginning September 1, 2007 (each, a Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 36-day months. Each payment may, at the option of the Payee, be calculated and
applied on an assumption that such payment would be made on its due date.

The acceptance by Payee of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute a waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly authorizes the Payee to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto.

This Note may be secured by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a Security Agreement) dated as of December 30,2005, as
amended.

Time is of the essence hereof. If any installment or any other sum due under this Note or any Security Agreement is not received within ten
(10) days after its due date, the Maker agrees to pay, in addition to the amount of each such installment or other sum, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful
maximum. If (i) Maker fails to make payment of any amount due hereunder within ten (10) days after the same becomes due and payable; or (ii) Maker is in default under, or fails to perform under any term or condition contained in any
Security Agreement, then the entire principal sum remaining unpaid, together with all accrued interest thereon and any other sum payable under this Note or any Security Agreement, at the election of Payee, shall immediately become due and payable,
with interest thereon at the lesser of eighteen percent (18%) per annum or the highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the men outstanding gross amount
due. Thereafter, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following percentages of the then outstanding principal balance
for the indicated period: Following the eighteenth month but prior to the twenty-fourth monthly payment of this Note: four percent (4%) Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%) Thereafter
and prior to the forty-eighth monthly payment of this Note: two percent (2%) and zero percent (0%) thereafter, plus all other sums due hereunder or under any Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that,
notwithstanding any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the maximum amount permitted by
applicable law. If any such excess interest is contracted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern
and control (b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and (d) the effective rate of interest shall
be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the
rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by
Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater
interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other
than the Maker, an
Obligor
) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases
of, security or of any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit may be brought and maintained against
any one or more of them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The
Maker and each Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence
in collecting this Note or enforcing any of the security hereof, and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess
of twenty percent (20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR
THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODDTCATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION, IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supersedes all
prior understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose
given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

/s/ Melissa Donnarummo

(Witness)

By: /
s/ Mary Kay Fenton

Melissa Donnarummo

(Print name)

Name:
Mary Kay Fenton

300 George St., New Haven, CT 06511

(Address)

Title:
Chief Financial Officer

Federal Tax ID #:
522113479

Address: 300 George Street, New Haven, New Haven County, CT 06511

Date: June 28, 2007

Oxford Finance Corporation

133 N. Fairfax Street

Alexandria, VA 22314

Gentlemen:

You are hereby irrevocably authorized and directed to deliver and apply the proceeds of your loan to the undersigned evidenced by that Promissory Note dated 6/28/2007 and secured by that Master Security Agreement
dated 12/30/2005, as amended, as follows:

Gross Loan Proceeds (Tranche 3) to be distributed as follows:

$

400,000.00

Achillion Pharmaceuticals, Inc.

$

399,614.00

Oxford Finance Corporation

$

386.00

*

* Interim Interest from date of funding through June 30, 2007 of $386.00.

This authorization and direction is given pursuant to the same authority authorizing the above-mentioned borrowing.

Very truly yours,

Achillion Pharmaceuticals, Inc.

By:
/s/ Mary Kay Fenton

Name:
Mary Kay Fenton

Title:
Chief Financial Officer

AMORTIZATION SCHEDULE

LENDING COMPANY:

GE Capital

PRINCIPAL:

$

400,000.00

INTEREST RATE:

11.58

%

TERM (MONTHS):

36

MONTHLY PAYMENT:

$

13,205.62

36

MONTH

PAYMENT

PRINCIPAL

INTEREST

BALANCE

1

7/1/2007

386.00

400,000.00

2

8/1/2007

13.205.62

9,345.63

3,859.99

390,654.37

3

9/1/2007

13,205.62

9,435.81

3,769.81

381,218.66

4

10/1/2007

13,205.62

9,526.86

3,678.76

371,691.70

5

11/1/2007

13,205.62

9,618.81

3,586.81

362,072.90

6

12/1/2007

13,205.62

9,711.62

3,494.00

352,361.28

7

1/1/2008

13,205.62

9,805.33

3,400.29

342,555.95

8

2/1/2008

13,205.62

9,899.96

3,305.66

332,655.99

9

3/1/2008

13,205.62

9,995.50

3,210.12

322,660.49

10

4/1/2008

13,205.62

10,091.95

3,113.67

312,568.55

11

5/1/2008

13,205.62

10,189.34

3,016.28

302,379.20

12

6/1/2008

13,205.62

10,287.67

2,917.95

292,091.53

13

7/1/2008

13,205.62

10,386.95

2,818.67

281,704.59

14

8/1/2008

13,205.62

10,487.17

2,718.45

271,217.42

15

9/1/2008

13,205.62

10,588.37

2,617.25

260,629.04

16

10/1/2008

13,205.62

10,690.55

2,515.07

249,938.49

17

11/1/2008

13,205.62

10,793.71

2,411.91

239,144.78

18

12/1/2008

13,205.62

10,897.87

2,307.75

228,246.91

19

1/1/2009

13,205.62

11,003.04

2,202.58

217,243.87

20

2/1/2009

13.205.62

11,109.22

2,096.40

206,134.65

21

3/1/2009

13,205.62

11,216.42

1,989.20

194,918.23

22

4/1/2009

13,205.62

11,324.66

1,880.96

183,593.57

23

5/1/2009

13,205.62

11,433.94

1,771.68

172,159.63

24

6/1/2009

13,205.62

11,544.28

1,661.34

160,615.35

25

7/1/2009

13,205.62

11,655.68

1,549.94

148,959.67

26

8/1/2009

13,205.62

11,768.16

1,437.46

137,191.51

27

9/1/2009

13,205.62

11,881.72

1,323.90

125,309.79

28

10/1/2009

13,205.62

11,996.38

1,209.24

113,313.41

29

11/1/2009

13,205.62

12,112.15

1,093.47

101,201.26

30

12/1/2009

13,205.62

12,229.03

976.59

88,972.24

31

1/1/2010

13,205.62

12,347.04

858.58

76,625.20

32

2/1/2010

13,205.62

12,466.19

739.43

64,159.01

33

3/1/2010

13,205.62

12,586.49

619.13

51,572.53

34

4/1/2010

13,205.62

12,707.95

497.67

38,864.58

35

5/1/2010

13,205.62

12,830.58

375.04

26,034.00

36

6/1/2010

26,285.23

26,034.01

251.23

(0.00)

475,276.31

400,000.00

75,662.31

PROMISSORY NOTE

December 30, 2005

(Date)

FOR VALUE RECEIVED,
Achillion Pharmaceuticals, Inc.
, a corporation located at the address stated below (
Maker
) promises, jointly and severally if more than one, to pay to the order of
Oxford Finance Corporation
or any subsequent holder hereof (each, a 
Payee
) at its office located at
133 N. Fairfax Street, Alexandria, VA 22314
or at such other place as Payee or the holder hereof may designate, the
principal sum of
Two Million Five Hundred Thousand Dollars ($2,500,000)
, with interest on the unpaid principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of Ten and Ninety Two Hundreds
percent (10.92%) per annum, to be paid in lawful money of the United States, in Thirty Six (36) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Thirty Five (35)

$

81,014.90

each (Periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due and payable on
and the following Periodic
Installments and the final installment shall be due and payable on the same day of each succeeding month (each, a Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment
may, at the option of the Payee, be calculated and applied on an assumption that such payment would be made on its due date.

The acceptance by Payee of
any payment which is less than payment in full of all amounts due and owing at such time shall not constitute a waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly authorizes the Payee to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining
hereto.

This Note may be secured by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a

Security Agreement
), dated as of December 30, 2005.

Time is of the essence hereof. If any installment or any other sum due under
this Note or any Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to the amount of each such installment or other sum, a late payment charge of five percent (5%) of the amount
of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due hereunder within ten (10) days after the same becomes due and payable; or (ii) Maker is in default under, or
fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid, together with all accrued interest thereon and any other sum payable under this Note or any Security Agreement, at the
election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent (18%) per annum or the highest rate not prohibited by applicable law from the date of such accelerated maturity until paid
(both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness
hereunder upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the
following percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior to the twenty-fourth
monthly payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%)

Thereafter and prior to the forty-eighth monthly payment of this Note: two percent (2%)

and zero percent (0%) thereafter, plus all other sums due hereunder or under any Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that,
notwithstanding any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the maximum amount permitted by
applicable law. If any such excess interest is contracted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern
and control, (b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and (d) the effective rate of interest shall
be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the
rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by
Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater
interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other
than the Maker, an 
Obligor
) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases
of; security or of any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit may be brought and maintained against
any one or more of them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The
Maker and each Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence
in collecting this Note or enforcing any of the security hereof; and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess
of twenty percent (20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR
THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose
given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

/s/ Thomas J. Menner

By:

/s/ Mary Kay Fenton

(Witness)

Thomas J. Menner

Name:

Mary Kay Fenton

(Print Name)

1381 Farmington Ave. W. Htfd, CT

Title:

VP, Finance

(Address)

Federal Tax ID#: 522113479

Address:

300 George Street, New Haven,

New Haven County, CT
06511

PROMISSORY NOTE

May 12, 2006

(Date)

FOR VALUE RECEIVED,
Achillion Pharmaceuticals, Inc.
, a corporation located at the address stated below (
Maker
) promises, jointly and severally if more than one, to pay to the order of
Oxford Finance Corporation
or any subsequent holder hereof (each, a 
Payee
) at its office located at
133 N. Fairfax Street, Alexandria, VA 22314
or at such other place as Payee or the holder hereof may designate, the
principal sum of
Two Million Five Hundred Thousand Dollars ($2,500,000)
, with interest on the unpaid principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of Eleven and Fifty Four One
Hundredths percent (11.54%) per annum, to be paid in lawful money of the United States, in Thirty Six (36) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Thirty Five (35)

$

81,701.88

each (Periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due and payable on
and the following Periodic
Installments and the final installment shall be due and payable on the same day of each succeeding month beginning July 1, 2006 (each, a Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve
30-day months. Each payment may, at the option of the Payee, be calculated and applied on an assumption that such payment would be made on its due date.

The acceptance by Payee of any payment which is less than payment in full of all amounts due and owing at such time shall not constitute a waiver of Payees right to receive payment in full at such time or at any prior or subsequent
time.

The Maker hereby expressly authorizes the Payee to insert the date value is actually given in the blank space on the face hereof and on all related
documents pertaining hereto.

This Note may be secured by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is
hereinafter called a 
Security Agreement
), dated as of December 30, 2005.

Time is of the essence hereof. If any installment or any
other sum due under this Note or any Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to the amount of each such installment or other sum, a late payment charge of five percent
(5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due hereunder within ten (10) days after the same becomes due and payable; or (ii) Maker
is in default under, or fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid, together with all accrued interest thereon and any other sum payable under this Note or any
Security Agreement, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent (18%) per annum or the highest rate not prohibited by applicable law from the date of such
accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in
part, its entire indebtedness hereunder upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as
a premium equal to the following percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior
to the twenty-fourth monthly payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent
(3%)

Thereafter and prior to the forty-eighth monthly payment of this Note: two percent (2%) and zero percent (0%) thereafter, plus all other sums due
hereunder or under any Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that,
notwithstanding any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the maximum amount permitted by
applicable law. If any such excess interest is contracted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern
and control, (b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and (d) the effective rate of interest shall
be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the
rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by
Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater
interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other
than the Maker, an 
Obligor
) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases
of; security or of any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit may be brought and maintained against
any one or more of them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The
Maker and each Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence
in collecting this Note or enforcing any of the security hereof; and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess
of twenty percent (20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR
THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose
given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

/s/ Marita Khein

By:

/s/ Mary Kay Fenton

(Witness)

Marita Khein

Name:

Mary Kay Fenton

(Print Name)

300 George St.

New Haven, CT 06511

Title:

VP, Finance

(Address)

Federal Tax ID#: 522113479

Address:

300 George Street, New Haven,

New Haven County, CT
06511

MASTER SECURITY AGREEMENT

dated as of December 30, 2005 (
Agreement
)

THIS
AGREEMENT
is between
Oxford Finance Corporation
(together with its successors and assigns, if any, 
Secured Party
) and
Achillion Pharmaceuticals, Inc.
(
Debtor
). Secured Party has an office at
133 N. Fairfax Street, Alexandria, VA 22314. Debtor is a corporation organized and existing under the laws of the state of Delaware. Debtors mailing address and chief place of business is 300 George Street, New Haven, CT 06511.

1.

CREATION OF SECURITY INTEREST.

Debtor grants to
Secured Party, its successors and assigns, a security interest in and against all property listed on any collateral schedule now or in the future annexed to or made a part of this Agreement (
Collateral Schedule
), and in and
against all additions, attachments, accessories and accessions to such property, all substitutions, replacements or exchanges therefor, and all insurance and/or other proceeds thereof (all such property is individually and collectively called the

Collateral
). This security interest is given to secure the payment and performance of all debts, obligations and liabilities of any kind whatsoever of Debtor to Secured Party (other than any obligations of Debtor to Secured Party
in connection with any purchase of equity securities of Debtor, including any right to invest in equity financings by Debtor and including the issuance of any warrants for the purchase of Debtors equity securities), now existing or arising in
the future, including but not limited to the payment and performance of certain Promissory Notes from time to time identified on any Collateral Schedule (collectively 
Notes
 and each a 
Note
), and any renewals,
extensions and modifications of such debts, obligations and liabilities (such Notes, debts, obligations and liabilities are called the 
Indebtedness
). Unless otherwise provided by applicable law, notwithstanding anything to the
contrary contained in this Agreement, to the extent that Secured Party asserts a purchase money security interest in any items of Collateral (
PMSI Collateral
): (i) the PMSI Collateral shall secure only that portion of the
Indebtedness which has been advanced by Secured Party to enable Debtor to purchase, or acquire rights in or the use of such PMSI Collateral (the 
PMSI Indebtedness
), and (ii) no other Collateral shall secure the PMSI
Indebtedness.

2.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.

Debtor represents, warrants and covenants as of the date of this Agreement and as of the date of each Collateral Schedule, unless specifically otherwise disclosed, that:

(a) Debtors exact legal name is as set forth in the preamble of this Agreement and Debtor is, and will remain, duly organized, existing and in good
standing under the laws of the State set forth in the preamble of this Agreement, has its chief executive offices at the location specified in the preamble, and is, and will remain, duly qualified and licensed in every jurisdiction wherever
necessary to carry on its business and operations;

(b) Debtor has adequate power and capacity to enter into, and to perform its
obligations under this Agreement, each Note and any other documents evidencing, or given in connection with, any of the Indebtedness (all of the foregoing, excluding the Warrant, are called the 
Debt Documents
);

(c) This Agreement and the other Debt Documents have been duly authorized, executed and delivered by Debtor and constitute legal, valid and binding
agreements enforceable in accordance with their terms, except to the extent that the enforcement of remedies may be limited under applicable bankruptcy and insolvency laws and equitable remedies;

(d) No approval, consent or withholding of objections is required from any governmental authority or instrumentality with respect to the entry into, or
performance by Debtor of any of the Debt Documents, except any already obtained;

(e) The entry into, and performance by, Debtor of the
Debt Documents will not (i) violate any of the organizational documents of Debtor or any judgment, order, law or regulation applicable to Debtor, or (ii) result in any breach of or constitute a default under

any contract to which Debtor is a party, or result in the creation of any lien, claim or encumbrance on any of
Debtors property (except for liens in favor of Secured Parties) pursuant to any indenture, mortgage, deed of trust, bank loan, credit agreement, or other agreement or instrument to which Debtor is a party;

(f) There are no suits or proceedings pending in court or before any commission, board or other administrative agency against or affecting Debtor which
could, in the aggregate, have a material adverse effect on Debtor, its business or operations, or its ability to perform its obligations under the Debt Documents, nor does Debtor have reason to believe that any such suits or proceedings are
threatened;

(g) All financial statements delivered to Secured Party in connection with the Indebtedness have been prepared in accordance
with generally accepted accounting principles, and since the date of the most recent financial statement, there has been no material adverse change in Debtors financial condition;

(h) The Collateral is not, and will not be, used by Debtor for personal, family or household purposes;

(i) The Collateral is, and will remain, in good condition and repair and Debtor will not be negligent in its care and use;

(j) Debtor is, and will remain, the sole and lawful owner, and in possession of, the Collateral, and has the sole right and lawful authority to grant the
security interest described in this Agreement; and

(k) The Collateral is, and will remain, free and clear of all liens, claims and
encumbrances of any kind whatsoever, except for (i) liens in favor of Secured Parties, (ii) liens for taxes not yet due or for taxes being contested in good faith and which do not involve, in the judgment of Secured Party, any risk of the
sale, forfeiture or loss of any of the Collateral, (iii) inchoate materialmens, mechanics, repairmens and similar liens arising by operation of law in the normal course of business for amounts which are not delinquent; and
(iv) Debtors fulfillment of its obligations pursuant to its collaboration agreement with Gilead Sciences, Inc. (all of such liens are called 
Permitted Liens
).

3.

COLLATERAL.

(a) Until the declaration of any
default under Section 7, Debtor shall remain in possession of the Collateral; except that Secured Party shall have the right to possess (i) any chattel paper or instrument that constitutes a part of the Collateral, and (ii) any other
Collateral in which Secured Partys security interest may be perfected only by possession. Secured Party may inspect any of the Collateral during normal business hours after giving Debtor reasonable prior notice. If Secured Party asks, Debtor
will promptly notify Secured Party in writing of the location of any Collateral.

(b) Debtor shall (i) use the Collateral only in its
trade or business, (ii) maintain all of the Collateral in good operating order and repair, normal wear and tear excepted, (iii) use and maintain the Collateral only in compliance with manufacturers recommendations and all applicable laws,
and (iv) keep all of the Collateral free and clear of all liens, claims and encumbrances (except for Permitted Liens).

(c) Secured
Party does not authorize and Debtor agrees it shall not (i) part with possession of any of the Collateral (except to Secured Party or for maintenance and repair), (ii) remove any of the Collateral from the continental United States, or
(iii) sell, rent, lease, mortgage, license, grant a security interest in or otherwise transfer or encumber (except for Permitted Liens) any of the Collateral.

(d) Debtor shall pay promptly when due all taxes, license fees, assessments and public and private charges levied or assessed on any of the Collateral, on its use, or on this Agreement or any of the other Debt
Documents. At its option, Secured Party may discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral and may pay for the maintenance, insurance and preservation of the Collateral and effect
compliance with the terms of this Agreement or any of the other Debt Documents. Debtor agrees to reimburse Secured Party, on demand, all costs and expenses incurred by Secured Party in connection with such payment or performance and agrees that such
reimbursement obligation shall constitute Indebtedness.

(e) Debtor shall, at all times, keep accurate and complete records of the
Collateral, and Secured Party shall have the right to inspect and make copies of all of Debtors books and records relating to the Collateral during normal business hours, after giving Debtor reasonable prior notice.

(f) Debtor agrees and acknowledges that any third person who may at any time possess all or any portion of the Collateral shall be deemed to hold, and
shall hold, the Collateral as the agent of, and as pledge holder for, Secured Party. Secured Party may at any time give notice to any third person described in the preceding sentence that such third person is holding the Collateral as the agent of,
and as pledge holder for, the Secured Party.

4.

INSURANCE.

(a) Debtor shall at all times bear the
entire risk of any loss, theft, damage to, or destruction of, any of the Collateral from any cause whatsoever.

(b) Debtor agrees to keep
the Collateral insured against loss or damage by fire and extended coverage perils, theft, burglary, and for any or all Collateral which are vehicles, for risk of loss by collision, and if requested by Secured Party, against such other risks as
Secured Party may reasonably require. The insurance coverage shall be in an amount no less than the full replacement value of the Collateral, and deductible amounts, insurers and policies shall be acceptable to Secured Party. Debtor shall deliver to
Secured Party policies or certificates of insurance evidencing such coverage. Each policy shall name Secured Party as a loss payee, shall provide for coverage to Secured Party regardless of the breach by Debtor of any warranty or representation made
therein, shall not be subject to co-insurance, and shall provide that coverage may not be canceled or altered by the insurer except upon thirty (30) days prior written notice to Secured Party. Debtor appoints Secured Party as its
attorney-in-fact to make proof of loss, claim for insurance and adjustments with insurers, and to receive payment of and execute or endorse all documents, checks or drafts in connection with insurance payments. Secured Party shall not act as
Debtors attorney-in-fact unless Debtor is in default. Proceeds of insurance shall be applied, at the option of Secured Party, to repair or replace the Collateral or to reduce any of the Indebtedness.

5.

REPORTS.

(a) Debtor shall promptly notify Secured
Party of (i) any change in the name of Debtor, (ii) any change in the state of its incorporation or registration, (iii) any relocation of its chief executive offices, (iv) any relocation of any of the Collateral, (v) any of
the Collateral being lost, stolen, missing, destroyed, materially damaged or worn out, or (vi) any lien, claim or encumbrance other than Permitted Liens attaching to or being made against any of the Collateral.

(b) Debtor will deliver to Secured Party Debtors complete financial statements, certified by a recognized firm of certified public accountants,
within ninety (90) days of the close of each fiscal year of Debtor. If Secured Party requests, Debtor will deliver to Secured Party copies of Debtors quarterly financial reports certified by Debtors chief financial officer, within
ninety (90) days after the close of each of Debtors fiscal quarter. Debtor will deliver to Secured Party copies of all Forms 10-K and 10-Q, if any, within 30 days after the dates on which they are filed with the Securities and Exchange
Commission.

6.

FURTHER ASSURANCES.

(a) Debtor shall, upon request
of Secured Party, furnish to Secured Party such further information, execute and deliver to Secured Party such documents and instruments (including, without limitation, Uniform Commercial Code financing statements) and shall do such other acts and
things as Secured Party may at any time reasonably request relating to the perfection or protection of the security interest created by this Agreement or for the purpose of carrying out the intent of this Agreement. Without limiting the foregoing,
Debtor shall cooperate and do all

acts deemed necessary or advisable by Secured Party to continue in Secured Party a perfected first security interest in the Collateral subject to the rights
of GECC, and shall obtain and furnish to Secured Party any subordination, releases, landlord waivers, lessor waivers, mortgagee waivers, or control agreements, and similar documents as may be from time to time requested by, and in form and substance
satisfactory to, Secured Party.

(b) Debtor authorizes Secured Party to file a financing statement and amendments thereto describing the
Collateral and containing any other information required by the applicable Uniform Commercial Code. Debtor irrevocably grants to Secured Party the power to sign Debtors name and generally to act on behalf of Debtor to execute and file
applications for title, transfers of title, financing statements, notices of lien and other documents pertaining to any or all of the Collateral; this power is coupled with Secured Partys interest in the Collateral. Debtor shall, if any
certificate of title be required or permitted by law for any of the Collateral, obtain and promptly deliver to Secured Party such certificate showing the lien of this Agreement with respect to the Collateral. Debtor ratifies its prior authorization
for Secured Party to file financing statements and amendments thereto describing the Collateral and containing any other information required by the Uniform Commercial Code if filed prior to the date hereof.

(c) Debtor shall indemnify and defend the Secured Party, its successors and assigns, and their respective directors, officers and employees, from and
against all claims, actions and suits (including, without limitation, related attorneys fees) of any kind whatsoever arising, directly or indirectly, in connection with any of the Collateral.

7.

DEFAULT AND REMEDIES.

(a) Debtor shall be in
default under this Agreement and each of the other Debt Documents if (and so long as is continuing):

(i) Debtor breaches
its obligation to pay when due any installment or other amount due or coming due under any of the Debt Documents unless such failure to pay on the required due date is a result of the error or malfunction of any electronic payment system or other
system established for the electronic transfer of funds. If the error of malfunction of any electronic payment system or other systems persists for more than three (3) days, Debtor agrees to immediately send payment to Secured Party via wire
transfer or overnight mail;

(ii) Debtor, without the prior written consent of Secured Party, attempts to or does sell,
rent, lease, license, mortgage, grant a security interest in, or otherwise transfer or encumber (except for Permitted Liens) any of the Collateral;

(iii) Debtor breaches any of its insurance obligations under Section 4;

(iv) Debtor
breaches any of its other obligations under any of the Debt Documents and fails to cure that breach within thirty (30) days after written notice from Secured Party;

(v) Any warranty, representation or statement made by Debtor in any of the Debt Documents
or otherwise in connection with any of the Indebtedness shall be false or misleading in any material respect when made;

(vi) Any of the Collateral is subjected to attachment, execution, levy, seizure or confiscation in any legal proceeding or otherwise, or if any legal or administrative proceeding is commenced against Debtor or any of the Collateral, which
in the good faith judgment of Secured Party subjects any of the Collateral to a material risk of attachment, execution, levy, seizure or confiscation and no bond is posted or protective order obtained to negate such risk;

(vii) Debtor breaches or is in default under any other agreement between Debtor and Secured Party;

(viii) Debtor or any guarantor or other obligor for any of the Indebtedness (collectively 
Guarantor
) dissolves,
terminates its existence, becomes insolvent or ceases to do business as a going concern;

(ix) If Debtor or any Guarantor is
a natural person, Debtor or any such Guarantor dies or becomes incompetent;

(x) A receiver is appointed for all or of any
part of the property of Debtor or any Guarantor, or Debtor or any Guarantor makes any assignment for the benefit of creditors;

(xi) Debtor or any Guarantor files a petition under any bankruptcy, insolvency or similar law, or any such petition is filed against Debtor or any Guarantor and is not dismissed within sixty (60) days; or

(xii) Debtors improper filing of an amendment or termination statement relating to a filed financing statement describing the
Collateral.

(b) If Debtor is in default, the Secured Party, at its option, may declare any or all of the Indebtedness to be immediately
due and payable, without demand or notice to Debtor or any Guarantor. The accelerated obligations and liabilities shall bear interest (both before and after any judgment) until paid in full at the lower of eighteen percent (18%) per annum or
the maximum rate not prohibited by applicable law.

(c) After default, Secured Party shall have all of the rights and remedies of a Secured
Party under the Uniform Commercial Code, and under any other applicable law. Without limiting the foregoing, Secured Party shall have the right to (i) notify any account debtor of Debtor or any obligor on any instrument which constitutes part
of the Collateral to make payment to the Secured Party, (ii) with or without legal process, enter any premises where the Collateral may be and take possession of and remove the Collateral from the premises or store it on the premises,
(iii) sell the Collateral at public or private sale, in whole or in part, and have the right to bid and purchase at said sale, or (iv) lease or otherwise dispose of all or part of the Collateral, applying proceeds from such disposition to
the obligations then in default. If requested by Secured Party, Debtor shall promptly assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties. Secured
Party may also render any or all of the Collateral unusable at the Debtors

premises and may dispose of such Collateral on such premises without liability for rent or costs. Any notice that Secured Party is required to give to Debtor
under the Uniform Commercial Code of the time and place of any public sale or the time after which any private sale or other intended disposition of the Collateral is to be made shall be deemed to constitute reasonable notice if such notice is given
to the last known address of Debtor at least ten (10) days prior to such action.

(d) Proceeds from any sale or lease or other
disposition shall be applied: first, to all costs of repossession, storage, and disposition including without limitation attorneys, appraisers, and auctioneers fees; second, to discharge the obligations then in default; third, to
discharge any other Indebtedness of Debtor to Secured Party, whether as obligor, endorser, guarantor, surety or indemnitor; fourth, to expenses incurred in paying or settling liens and claims against the Collateral; and lastly, to Debtor, if there
exists any surplus. Debtor shall remain fully liable for any deficiency.

(e) Debtor agrees to pay all reasonable attorneys fees and
other costs incurred by Secured Party in connection with the enforcement, assertion, defense or preservation of Secured Partys rights and remedies under this Agreement, or if prohibited by law, such lesser sum as may be permitted. Debtor
further agrees that such fees and costs shall constitute Indebtedness.

(f) Secured Partys rights and remedies under this Agreement
or otherwise arising are cumulative and may be exercised singularly or concurrently. Neither the failure nor any delay on the part of the Secured Party to exercise any right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege preclude any other or further exercise of that or any other right, power or privilege. SECURED PARTY SHALL NOT BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS UNDER THIS AGREEMENT OR
UNDER ANY OTHER AGREEMENT, INSTRUMENT OR PAPER SIGNED BY DEBTOR UNLESS SUCH WAIVER IS EXPRESSED IN WRITING AND SIGNED BY SECURED PARTY. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future
occasion.

(g) DEBTOR AND SECURED PARTY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY
RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

8.

MISCELLANEOUS.

(a) This Agreement, any Note and/or
any of the other Debt Documents may be assigned, in whole or in part, by Secured Party without notice to Debtor, and Debtor agrees not to assert against any such assignee, or assignees assigns, any defense, set-off, recoupment claim or
counterclaim which Debtor has or may at any time have against Secured Party for any reason whatsoever. Debtor agrees that if Debtor receives written notice of an assignment from Secured Party, Debtor will pay all amounts payable under any assigned
Debt Documents to such assignee or as instructed by Secured Party. Debtor also agrees to confirm in writing receipt of the notice of assignment as may be reasonably requested by Secured Party or assignee.

(b) All notices to be given in connection with this Agreement shall be in writing, shall be addressed to the parties at their respective addresses set
forth in this Agreement (unless and until a different address may be specified in a written notice to the other party), and shall be deemed given (i) on the date of receipt if delivered in hand or by facsimile transmission, (ii) on the
next business day after being sent by express mail, and (iii) on the fourth business day after being sent by regular, registered or certified mail. As used herein, the term business day shall mean and include any clay other than
Saturdays, Sundays, or other days on which commercial banks in New York, New York are required or authorized to be closed.

(c) Secured
Party may correct patent errors and fill in all blanks in this Agreement or in any Collateral Schedule consistent with the agreement of the parties.

(d) Time is of the essence of this Agreement. This Agreement shall be binding, jointly and severally, upon all parties described as the Debtor and their respective heirs, executors, representatives,
successors and assigns, and shall inure to the benefit of Secured Party, its successors and assigns.

(e) This Agreement and its Collateral
Schedules constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior understandings (whether written, verbal or implied) with respect to such subject matter. THIS AGREEMENT AND
ITS COLLATERAL SCHEDULES SHALL NOT BE CHANGED OR TERMINATED ORALLY OR BY COURSE OF CONDUCT, BUT ONLY BY A WRITING SIGNED BY BOTH PARTIES. Section headings contained in this Agreement have been included for convenience only, and shall not affect the
construction or interpretation of this Agreement.

(f) This Agreement shall continue in full force and effect until all of the Indebtedness
has been indefeasibly paid in full to Secured Party or its assignee. The surrender, upon payment or otherwise, of any Note or any of the other documents evidencing any of the Indebtedness shall not affect the right of Secured Party to retain the
Collateral for such other Indebtedness as may then exist or as it may be reasonably contemplated will exist in the future. This Agreement shall automatically be reinstated if Secured Party is ever required to return or restore the payment of all or
any portion of the Indebtedness (all as though such payment had never been made).

(g) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND

CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH OF VIRGINIA (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT.

(h) Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the Uniform Commercial Code.

IN WITNESS WHEREOF
, Debtor and
Secured Party, intending to be legally bound hereby, have duly executed this Agreement in one or more counterparts, each of which shall be deemed to be an original, as of the day and year first aforesaid.

SECURED PARTY:

DEBTOR:

Oxford Finance Corporation

Achillion Pharmaceuticals, Inc.

By:

/
S
/ M
ICHAEL
J.
A
LTENBURGER

By:

/
S
/ M
ARY
K
AY
F
ENTON

Name:

Michael J. Altenburger

Name:

Mary Kay Fenton

Title:

Chief Financial Officer

Title:

VP, Finance

AMENDMENT NO. 01

THIS AMENDMENT is made as of the 30th day of December 2005, between Oxford Finance Corporation (Secured Party) and Achillion Pharmaceuticals, Inc. (Debtor) in connection with that certain
Master Security Agreement, dated as of the date hereof (Agreement). The terms of this Amendment are hereby incorporated into the Agreement as though fully set forth therein. Secured Party and Debtor mutually desire to amend the Agreement
as set forth below. Section references below refer to the section numbers of the Agreement.

Subsections 1 (b) is hereby added to the existing
paragraph (now to be identified as 1 (a) and reads as follows:

(b) With this Amendment, Debtor is, and Secured Party
acknowledges, entering into a similar financing with General Electric Capital Corporation, which will be referred to as GECC, or, together with Secured Party, will be referenced as Secured Parties. GE and Secured Party are
entering into an Intercreditor Agreement of same date as used in this Amendment. The Intercreditor Agreement sets forth the relative priority of Secured Parties with respect to the security interests in the Collateral (as there defined) and
allocates the distribution or any proceeds from any sale or disposition of the Collateral.

Subsections 2(1), (m), (n) and (o) are hereby
added and read as follows:

(l) Debtors Intellectual Property, as defined in Section 7 below, is and will remain free
and clear of all liens, claims and encumbrances of any kind whatsoever, except for Permitted Liens as defined in subsection (k) of this Section;

(m) Debtor has not and will not enter into any other agreement or financing arrangement, other than with Secured Parties, in which it granted a negative pledge in Debtors Intellectual Property to any other
party;

(n) To the extent Secured Party has outstanding balances with Debtor, Secured Party will have a right to first proceeds under any
permitted sale or transfer of Intellectual Property as set forth in the Intercreditor Agreement; and

(o) Debtor hereby grants to Secured
Party a right (but not an obligation) to invest up to $750,000 in each of the Debtors Subsequent Financings on the same terms, conditions and pricing offered to the lead investor of such financing. Debtor shall give Secured Party at least
thirty (30) days prior written notice of each Subsequent Financing containing the terms, conditions and pricing of each Subsequent Financing. As used herein, 
Subsequent Financing
 shall mean the next and any future
round of private equity financing. Secured Party hereby agrees that the rights under this Section 2(o) shall terminate upon the closing of an initial public offering of Debtors common stock.

Subsections 7(a)(xiii) through (xvii) are hereby added and read as follows:

(xiii) There is a material adverse change in the Debtors financial condition as determined reasonably by Secured Party (Secured party acknowledges that cash burn alone by Debtor shall not be deemed a
material adverse change if such cash burn does not materially exceed the cash burn projections provided to Secured Party as of December 30, 2005);

(xiv) Any Guarantor revokes or attempts to revoke its guaranty of any of the Indebtedness or fails to
observe or perform any covenant, condition or agreement to be performed under any guaranty or other related document to which it is a party;

(xv) Debtor defaults under any other material obligation for (A) borrowed money, (B) the deferred purchase price of property or (C) payments due under any lease agreement;

(xvi) At any time during the term of this Agreement Debtor experiences a change of control such that any person or entity acquires either more than 50%
or the voting stock of Debtor or all or substantially all of Debtors assets, in either case, without Secured Partys prior written consent; or

(xvii) Debtor or any guarantor or other obligor for any of the Indebtedness sells, transfers, assigns, mortgages, pledges, leases, grants a security interest in or encumbers any or all of Debtors Intellectual
Property now existing or hereafter acquired. Intellectual Property shall consist of but not be limited to any and all owned or licensed patents, trademarks and copyrights. For purposes of this paragraph xvii, licenses or sublicenses by the Debtor of
its Intellectual Property as part of a research and development or similar arrangement, or in fulfilling its existing obligations pursuant to its collaboration agreement with Gilead Sciences, Inc., shall be excluded. Debtor shall provide Secured
Party with a listing of licenses and sublicenses granted to third parties within ten (10) days of receipt of written request.

TERMS USED, BUT
NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN TO THEM IN THE AGREEMENT. EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT. IF THERE IS ANY CONFLICT BETWEEN THE PROVISIONS OF THE AGREEMENT AND THIS
AMENDMENT NO. 1, THEN THIS AMENDMENT NO. 1 SHALL CONTROL.

IN WITNESS WHEREOF
, the parties hereto have executed this Amendment
No. 01 by signature of their respective authorized representative set forth below.

Oxford Finance Corporation

Achillion Pharmaceuticals, Inc.

By:

/
S
/ M
ICHAEL
J.
A
LTENBURGER

By:

/
S
/ M
ARY
K
AY
F
ENTON

Name:

Michael J. Altenburger

Name:

Mary Kay Fenton

Title:

Chief Financial Officer

Title:

VP, Finance

COLLATERAL SCHEDULE NO. 001

Part of Master Security Agreement dated as of December 30, 2005 (the Contract)

between Oxford Finance Corporation (the Secured Party) and Achillion

Pharmaceuticals,
Inc. (the Debtor).

As security for the full and faithful performance by the Debtor of all of the terms and conditions upon
the Debtors part to be performed under the Contract and any other obligation of the Debtor to the Secured Party now or hereafter in existence Party (other than any obligations of Debtor to Secured Party in connection with any purchase of
equity securities of Debtor, including any right to invest in equity financings by Debtor and including the issuance of any warrants for the purchase of Debtors equity securities), the Debtor does hereby grant to the Secured Party a security
interest in the property listed below (all hereinafter collectively called the 
Additional Collateral
):

All of Debtors Personal
Property and Fixtures now owned or hereafter acquired and wherever located including but not limited to the following:

1. All Machinery, Equipment,
Furniture and Fixtures, now owned or hereafter acquired and wherever located, complete with any and all attachments, accessions, additions, replacements, improvements, modifications and substitutions thereto and therefor and all proceeds including
insurance proceeds and products thereof and therefrom.

2. All Accounts, Accounts Receivable, Contract Rights, General Intangibles, Investment Property,
Instruments, and Chattel Paper, now owned or hereafter acquired and wherever located, and all proceeds thereof and therefrom.

3. All Inventory and any
other goods, merchandise or other personal property held by Debtor for sale or lease and all, raw materials, work or goods in process or materials or supplies of every nature used, consumed or to be consumed in Debtors business, all of the
foregoing now owned or hereafter acquired and wherever located, and all proceeds, including insurance proceeds and products of any of the foregoing.

4.
Notwithstanding the foregoing, the Collateral does not include any of the following, whether now owned or hereafter acquired any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service
marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of Debtor connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights
to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing; provided, however, the Collateral shall include all Accounts, license and royalty fees and other revenues, proceeds, or
income arising out of or relating to any of the foregoing.

In the event of a default by the Debtor with respect to any of the conditions,
terms, covenants and provisions under the Contract or other agreement, Secured Party shall have the

rights and remedies of a secured party under the Uniform Commercial Code with respect to the Additional Collateral. The Debtor shall have the same
obligations with respect to the Additional Collateral as it has under the Contract with respect to the Collateral financed.

Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to them in the Contract.

This Agreement shall run to the
benefit of the Secured Partys successors and assigns.

Dated: 12/30/05

Oxford Finance Corporation

Achillion Pharmaceuticals, Inc.

BY:

/
S
/ M
ICHAEL
J.
A
LTENBURGER

BY:

/
S
/ M
ARY
K
AY
F
ENTON

Michael J. Altenburger

TITLE:

Chief Financial Officer

TITLE:

VP, Finance

Exhibit 10.2

PROMISSORY NOTE

June 28, 2007

(Date)

FOR VALUE RECEIVED,
Achillion
Pharmaceuticals, Inc.
a corporation located at the address stated below (
Maker
) promises, jointly and severally if more than one, to pay to the order of
General Electric Capital Corporation
or any subsequent bolder
hereof (each, a
Payee
) at its office located at
83 Wooster Heights Road, Danbury, CT 06810
or at such other place as Payee or the holder hereof may designate, the principal sum of
Four Hundred Thousand and 00/100 Dollars
($400,000.00)
, with interest on the unpaid principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of Eleven and Fifty Eight Hundredths percent (11.58%) per annum, to be paid in lawful
money of the United States, in Thirty-Six (36) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Thirty-Five (35)

$

13,205.62

each (Periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic installment shall be due and payable on August 1, 2007 and the following Periodic Installments and the final installment shall be due and payable on the same day of each succeeding month
(each, a Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment may, at the option of the Payee, be calculated and applied on an assumption that such payment would be
made on its due date.

The acceptance by Payee of any payment which is less than payment in full of all amounts due and owing at such time shall not
constitute a waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly
authorizes the Payee to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto.

This
Note may be secured by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a
Security Agreement
).

Time is of the essence hereof. If any installment or any other sum due under this Note or any Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to
the amount of each such installment or other sum, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due
hereunder within ten (10) days after the same becomes due and payable; or (ii) Maker is in default under, or fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid,
together with all accrued interest thereon and any other sum payable under this Note or any Security Agreement, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent
(18%) per annum or the highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but
not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following percentages of the then outstanding principal balance for the indicated period: Following the
eighteenth month but prior to the twenty-fourth monthly payment of this Note: four percent (4%) Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%) Thereafter and prior to the forty-eighth monthly
payment of this Note: two percent (2%) and zero percent (0%) thereafter, plus all other sums due hereunder or under any Security Agreement.

It is the
intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that, notwithstanding any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement
require the payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. If any such excess interest is

contracted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall
be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable
law, then in such event (a) the provisions of this paragraph shall govern and control, (b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to
the extent that it is in excess of the maximum amount of interest permitted by applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker,
at the option of the Payee, and (d) the effective rate of interest shall be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is
further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds
the maximum lawful contract rate, shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all
interest at any time contracted for, charged or received from Maker or otherwise by Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any
applicable state law, so that it becomes lawful for the Payee to receive a greater interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful
maximum hereunder shall be increased to the maximum interest per annum rate allowed by the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an
Obligor
) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and
all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of, security or of any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be
made, granted or consented to by Payee, and agree that suit may be brought and maintained against any one or more of them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to
foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and
all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting this Note or enforcing any of the security hereof, and agrees to pay (if permitted by law) all expenses incurred in collection,
including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess of twenty percent (20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN
MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY
OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN
THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the
entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all prior understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver,
consent, modification or change shall be effective only in the specific instance and for the specific purpose given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

/s/ Melissa Donnarummo

(Witness)

By: /
s/ Mary Kay Fenton

Melissa Donnarummo

(Print name)

Name:
Mary Kay Fenton

300 George St., New Haven, CT 06511

(Address)

Title:
Chief Financial Officer

Federal Tax ID #:
522113479

Address: 300 George Street, New Haven, New Haven County, CT 06511

Date: June 28, 2007

General Electric Capital Corporation

83 Wooster Heights Road

Danbury, CT 06810

Gentlemen:

You are hereby irrevocably authorized and directed to deliver and apply the proceeds of your loan to the undersigned evidenced by that Note dated May 11, 2006 and secured by that Security Agreement or Chattel
Mortgage dated March 21, 2002, as follows:

Achillion Pharmaceuticals, Inc.

$

394,614.00

GE Capital (Good Faith Deposit)

$

5,000.00

GE Capital (Interim Interest)

$

386.00

This authorization and direction is given pursuant to the same authority authorizing the
above-mentioned borrowing.

Very truly yours,

Achillion Pharmaceuticals, Inc.

By
: /s/ Mary Kay Fenton

Name:
Mary Kay Fenton

Title:
Chief Financial Officer

AMORTIZATION SCHEDULE

LENDING COMPANY:

GE Capital

PRINCIPAL:

$

400,000.00

INTEREST RATE:

11.58

%

TERM (MONTHS):

36

MONTHLY PAYMENT:

$

13,205.62

36

MONTH

PAYMENT

PRINCIPAL

INTEREST

BALANCE

1

7/1/2007

386.00

400,000.00

2

8/1/2007

13,205.62

9,345.63

3,859.99

390,654.37

3

9/1/2007

13,205.62

9,435.81

3,769.81

381,218.56

4

10/1/2007

13,205.62

9,526.86

3,678.76

371,691.70

5

11/1/2007

13,205.62

9,618.81

3,586.81

362,072.90

6

12/1/2007

13,205.62

9,711.62

3,494.00

352,361.28

7

1/1/2008

13,205.62

9,805.33

3,400.29

342,555.95

8

2/1/2008

13,205.62

9,899.96

3,305.66

332,655.99

9

3/1/2008

13,205.62

9,995.50

3,210.12

322,660.49

10

4/1/2008

13,205.62

10,091.95

3,113.67

312,568.55

11

5/1/2008

13,205.62

10,189.34

3,016.28

302,379.20

12

6/1/2008

13,205.62

10,287.67

2,917.95

292,091.53

13

7/1/2008

13,205.62

10,386.95

2,818.67

281,704.59

14

8/1/2008

13,205.62

10,487.17

2,718.45

271,217.42

15

9/1/2008

13,205.62

10,588.37

2,617.25

260,629.04

16

10/1/2008

13,205.62

10,690.55

2,515.07

249,938.49

17

11/1/2008

13,205.62

10,793.71

2,411.91

239,144.78

18

12/1/2008

13,205.62

10,897.87

2,307.75

228,246.91

19

1/1/2009

13,205.62

11,003.04

2,202.58

217,243.87

20

2/1/2009

13,205.62

11,109.22

2,096.40

206,134.65

21

3/1/2009

13,205.62

11,216.42

1,989.20

194,918.23

22

4/1/2009

13,205.62

11,324.66

1,880.96

183,593.57

23

5/1/2009

13,205.62

11,433.94

1,771.68

172,159.63

24

6/1/2009

13,205.62

11,544.28

1,661.34

160,615.35

25

7/1/2009

13,205.62

11,655.68

1,549.94

148,959.67

26

8/1/2009

13,205.62

11,768.16

1,437.46

137,191.51

27

9/1/2009

13,205.62

11,881.72

1,323.90

125,309.79

28

10/1/2009

13,205.62

11,996.38

1,209.24

113,313.41

29

11/1/2009

13,205.62

12,112.15

1,093.47

101,201.26

30

12/1/2009

13,205.62

12,229.03

976.59

88,972.24

31

1/1/2010

13,205.62

12,347.04

858.58

76,625.20

32

2/1/2010

13,205.62

12,466.19

739.43

64,159.01

33

3/1/2010

13,205.62

12,586.49

619.13

51,572.53

34

4/1/2010

13,205.62

12,707.95

497.67

38,864.58

35

5/1/2010

13,205.62

12,830.58

375.04

26,034.00

36

6/1/2010

26,285.23

26,034.01

251.23

(0.00)

475,276.31

400,000.00

75,662.31

PROMISSORY NOTE

3/22/02

(Date)

FOR VALUE RECEIVED,
Achillion Pharmaceuticals, Inc.
a corporation located at the address stated below
(
Maker
) promises, jointly and severally if more than one, to pay to the order of
General Electric Capital Corporation
or any subsequent holder hereof (each, a
Payee
) at its office located at
401
Merritt 7 Suite 23, Norwalk, CT 06851
or at such other place as Payee or the holder hereof may designate, the principal sum of
One Million One Hundred Forty-Four Thousand Five Hundred Twenty-Three 46/100 Dollars ($1,144,523.16)
, with
interest on the unpaid principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of Nine and Sixty-Six Hundredths percent (9.66%) per annum, to be paid in lawful money of the United States, in
Thirty-Six (36) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Thirty-Five (35)

$

36,748.11

each (Periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due and payable on 5/1/02 and the following Periodic Installments and the final installment shall be due and payable on the same day of each succeeding month (each, a
Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment may, at the option of the Payee, be calculated and applied on an assumption that such payment would be made on its
due date.

The acceptance by Payee of any payment which is less than payment in full of all amounts due and owing at such time shall not constitute a
waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly authorizes the Payee
to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto.

This Note may be secured
by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a
Security Agreement
).

Time is of the essence hereof. If any installment or any other sum due under this Note or any Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to the amount of each such
installment or other sum, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due hereunder within ten
(10) days after the same becomes due and payable; or (ii) Maker is in default under, or fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid, together with all
accrued interest thereon and any other sum payable under this Note or any Security Agreement, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent (18%) per annum or the
highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following
percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior to the twenty-fourth monthly
payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%)

Thereafter and prior to the forty-eighth monthly payment of this Note: two percent (2%)

and zero percent (0%) thereafter, plus all other sums due hereunder or under any Security Agreement.

It is the intention
of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that, notwithstanding any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the
payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. If any such excess interest is contracted for, charged or received under this Note or any Security Agreement, or if all of the principal
balance shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by
applicable law, then in such event (a) the provisions of this paragraph shall govern and control, (b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount of interest permitted by applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or
refunded to Maker, at the option of the Payee, and (d) the effective rate of interest shall be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having
jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining
whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness
evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of
America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may
be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an
Obligor
) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of and all substitutions or releases of, security or of
any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit may be brought and maintained against any one or more of
them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each
Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting
this Note or enforcing any of the security hereof; and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess of twenty
percent (20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose
given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall be deemed omitted,
modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

By:

/s/ Mary Kay Fenton

(Witness)

Name:

Mary Kay Fenton

(Print name)

Title:

Sr. Director, Finance

(Address)

Federal Tax ID #:
522113479

Address:

300 George Street, New Haven, New

Haven County, CT 06511

COLLATERAL SCHEDULE NO. 002

THIS COLLATERAL SCHEDULE NO. 002
is annexed to and made a part of that certain Master Security Agreement dated as of 3/21/02 between General Electric Capital Corporation, together with its successors and
assigns, if any, as Secured Party and Achillion Pharmaceuticals, Inc. as Debtor and describes collateral in which Debtor has granted Secured Party a security interest in connection with the Indebtedness (as defined in the Security Agreement)
including without limitation that certain Promissory Note dated 3/22/02 in the original principal amount of $1,144,523.16.

Quantity

Manufacturer

Serial Number

Year/Model and Type of Equipment

SEE EXHIBIT A ATTACHED HERETO AND MADE A PART HEREOF

SECURED PARTY:

DEBTOR:

General Electric Capital Corporation

Achillion Pharmaceuticals, Inc.

By:

/s/ John Edel

By:

/s/ Mary Kay Fenton

Name:

John Edel

Name:

Mary Kay Fenton

Title:

SVP

Title:

Sr. Director, Finance

Date:

Date:

3/21/02

CERTIFICATE OF DELIVERY/INSTALLATION

Undersigned hereby certify that all equipment and property covered by a Security Agreement or Chattel Mortgage dated 3/21/02 and Note dated 3/22/02, between General Electric Capital Corporation (together with its
successors and assigns, if any,
Secured Party
) and undersigned has been delivered to undersigned and found satisfactory, and that any and all installation has been satisfactorily completed. In order to induce Secured Party to
advance the loan evidenced by such Note, undersigned hereby waive any defense, counterclaim or offset thereunder as against Secured Party.

Achillion Pharmaceuticals, Inc.

By:

/s/ Mary Kay Fenton

Name:

Mary Kay Fenton

Title:

Sr. Director, Finance

Date:

3/21/02

Date March 21, 2002

General Electric Capital Corporation

401 Merritt 7 Suite 23

Norwalk, CT 06851-1177

Gentlemen:

You are hereby irrevocably authorized and directed to deliver and apply the proceeds of your loan to the undersigned evidenced by that Note dated 3/22/02 and secured by that Security Agreement or Chattel Mortgage
dated 3/21/02, as follows:

Achillion Pharmaceuticals, Inc.
1,144,523.16

This
authorization and direction is given pursuant to the same authority authorizing the above-mentioned borrowing.

Very truly yours,

Achillion Pharmaceuticals, Inc.

By:

/s/ Mary Kay Fenton

Name:

Mary Kay Fenton

Title:

Sr. Director, Finance

PROMISSORY NOTE

3/22/02

(Date)

FOR VALUE RECEIVED,
Achillion Pharmaceuticals, Inc
a corporation located at the address stated below
(
Maker
) promises, jointly and severally if more than one, to pay to the order of General Electric Capital Corporation or any subsequent holder hereof (each, a
Payee
) at its office located at
401 Merritt 7
Suite 23, Norwalk, CT 06851
or at such other place as Payee or the holder hereof may designate, the principal sum of
One Hundred Forty-Four Thousand Three Hundred Fifty-Seven 69/100 Dollars ($144,357.69)
, with interest on the unpaid
principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of Ten and Seventeen Hundredths percent (10.17%) per annum, to be paid in lawful money of the United States, in Forty-Eight
(48) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Forty-Seven (47)

$

3,673.08

each (Periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due and payable on
5/1/02 and the following Periodic Installments and the final installment shall be due and payable on the same day of each succeeding month (each, a
Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment may, at the option of the Payee, be calculated and applied on an assumption that such payment would be made on its
due date.

The acceptance by Payee of any payment which is less than payment in full of all amounts due and owing at such time shall not constitute a
waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly authorizes the Payee
to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto.

This Note may be secured
by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a
Security Agreement
).

Time is of the essence hereof. If any installment or any other sum due under this Note many Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to the amount of each such
installment or other sum, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due hereunder within ten
(10) days after the same becomes due and payable; or (ii) Maker is in default under, or fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid, together with all
accrued interest thereon and any other sum payable under this Note or any Security Agreement, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent (18%) per annum or the
highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but not in pad, its entire Indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following
percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior to the twenty-fourth monthly
payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%)

Thereafter and prior to the forty-eighth monthly payment of this Note: two percent (2%) and zero percent (0%) thereafter, plus all other sums due hereunder or under any
Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that, notwithstanding
any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. If any
such excess interest is contracted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or
received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern and control,
(b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by applicable
law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and (d) the effective rate of interest shall be
automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the
rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by
Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater
interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an
Obligor
) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of, security or of
any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit may be brought and maintained against any one or more of
them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each
Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by Law) and diligence in collecting
this Note or enforcing any of the security hereof, and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess of twenty
percent (20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose
given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall be deemed omitted,
modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

By:

/s/ Mary Kay Fenton

(Witness)

Name:

Mary Kay Fenton

(Print name)

Title:

Sr. Director, Finance

(Address)

Federal Tax ID #: 522113479

Address:

300 George Street, New Haven, New

Haven County, CT 06511

PROMISSORY NOTE

6/11/02

(Date)

FOR VALUE RECEIVED,
Achillion Pharmaceuticals, Inc
a corporation located at the address stated below
(
Maker
) promises, jointly and severally if more than one, to pay to the order of General Electric Capital Corporation or any subsequent holder hereof (each, a
Payee
) at its office located at
401 Merritt 7
Suite 23, Norwalk, CT 06851
or at such other place as Payee or the holder hereof may designate, the principal sum of
Eight Hundred Thirteen Thousand Thirteen 50/100 Dollars ($813,013.50)
, with interest on the unpaid principal balance.
from the date hereof through and including the dates of payment, at a fixed interest rate of Nine and Forty-One Hundredths percent (9.41%) per annum, to be paid in lawful money of the United States, in Forty-Eight (48) consecutive monthly
installments of principal and interest as follows:

Periodic Installment

Amount

Thirty-Six (36)

$

23,166.32

Eleven (11)

$

10,327.03

each (Periodic installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due and payable on
8/1/02, and the following Periodic Installments and the final installment shall be due and payable on the same day of each succeeding month (each,
a Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment may, at the option of the Payee, be calculated and applied on an assumption that such payment would be made on
its due date.

The acceptance by Payee of any payment which is less than payment in full of all amounts due and owing at such time shall not constitute a
waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly authorizes the Payee
to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto.

This Note may be secured
by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a
Security Agreement
).

Time is of the essence hereof. If any installment or any other sum due under this Note or any Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to the amount of each such
installment or other sum, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due hereunder within ten (10) days
after the same becomes due and payable; or (ii) Maker is in default under, or fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid, together with all accrued interest
thereon and any other sum payable under this Note or any Security Agreement, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent (18%) per annum or the highest rate not
prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following
percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior to the twenty-fourth monthly
payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%)

Thereafter and prior to the forty-eighth monthly payment of this Note: two percent (2%) and zero percent (0%) thereafter, plus all other sums due hereunder or under any
Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that, notwithstanding
any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. If any
such excess interest is contracted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or
received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern and control,
(b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by applicable
law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and {d) the effective rate of interest shall be automatically
reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest
contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by applicable law, by
amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by Payee in
connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater interest per
annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by the amended
state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an
Obligor) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of, security or of any
party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made. granted or consented to by Payee, and agree that suit may be brought and maintained against any one or more of them,
at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each Obligor
hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting this
Note or enforcing any of the security hereof, and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess of twenty percent
(20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all prior
understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its provisions or
conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

/s/ Melissa Donnarummo

By:

/s/ Mary Kay Fenton

(Witness)

Melissa Donnarummo

Name:

Mary Kay Fenton

(Print name)

300 George St. New Haven CT 06511

Title:

Sr. Director, Finance

(Address)

Federal Tax ID #:
52-211-3479

Address:

300 George Street, New Haven, New

Haven County, CT 06511

COLLATERAL SCHEDULE NO. 003

THIS COLLATERAL SCHEDULE NO. 003
is annexed to and made a part of that certain Master Security Agreement dated as of January 24, 2002 between General Electric Capital Corporation, together with its
successors and assigns, if any, as Secured Party and Achillion Pharmaceuticals, Inc. as Debtors and describes collateral in which Debtor has granted Secured Party a security interest in connection with the indebtedness (as defined in the Security
Agreement) including without limitation that certain Promissory Note dated
in the original principal amount of
$813,013.50.

Quantity

Manufacturer

Serial Number

Year/Model and Type of Equipment

SEE EXHIBIT A ATTACHED HERETO AND MADE A PART HEREOF

SECURED PARTY:

DEBTOR:

General Electric Capital Corporation

Achillion Pharmaceuticals, Inc.

By:

/s/ John Edel

By:

/s/ Mary Kay Fenton

Name:

John Edel

Name:

Mary Kay Fenton

Title:

SVP

Title:

Sr. Director, Finance

Date:

6/12/02

Date:

6/6/02

PROMISSORY NOTE

Sept. 17, 2002

(Date)

FOR VALUE RECEIVED,
Achillion Pharmaceuticals
,
Inc.
a corporation located at the address
stated below (
Maker
) promises, jointly and severally if more than one, to pay to the order of General Electric Capital Corporation or any subsequent holder hereof (each, a
Payee
) at its office located at
401
Merritt 7 Suite 23, Norwalk, CT 06851
or at such other place as Payee or the holder hereof may designate, the principal sum of
FOUR HUNDRED TWO THOUSAND NINE HUNDRED SEVENTY TWO- 89/00 Dollars ($402,972.89)
, with interest on the unpaid
principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of Eight and Twenty Eight Hundredths percent (8.28%) per annum, to be paid in lawful money of the United States, in Forty-Eight
(48) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Thirty-Six (36)

$

11,077.93

Eleven (11)

$

5,680.11

each (Periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due and payable on Nov. 1, 2002 and the following Periodic Installments and the final installment shall be due and payable on the same day of each succeeding month (each, a
Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment may, at the option of the Payee, be calculated and applied on an assumption that such payment would be made on its
due date.

The acceptance by Payee of any payment which is less than payment in full of all amounts due and owing at such time shall not constitute a
waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly authorizes the Payee
to insert the date value is actually given in the blank space on the face hereof and on all related- documents pertaining hereto.

This Note may be secured
by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a Security Agreement).

Time is of the essence hereof. If any installment or any other sum due under this Note or any Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to the amount of each such
installment or other sum, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due hereunder within ten
(10) days after the same becomes due and payable: or (ii) Maker is in default under, or fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid, together with all
accrued interest thereon and any other sum payable under

this Note or any Security Agreement. at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen
percent (18%) per annum or the highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but
not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior to the twenty-fourth monthly payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%)

Thereafter and prior to the forty-eighth monthly payment of this Note: two percent (2%) and zero percent (0%) thereafter, plus all other sums due hereunder or under any Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that, notwithstanding any provision to the contrary in this
Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. of any such excess interest is contracted
for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under this Note or any
Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern and control, (b) neither Maker nor any other person
or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by applicable law, (c) any such excess which may have
been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and (d) the effective rate of interest shall be automatically reduced to the maximum lawful contract
rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received
under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and
spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by Payee in connection with such indebtedness; provided,
however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater interest per annum rate than is presently allowed, the
Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by the amended state law or the law of the United States of
America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an
Obligor
) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of, security or of
any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit maybe brought and maintained against any one or more of
them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each
Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting
this Note or enforcing any of the security hereof, and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess of twenty
percent (20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS. AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose
given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

By:

/s/ Mary Kay Fenton

(Witness)

Name:

Mary Kay Fenton

(Print Name)

Title:

Sr. Director, Finance

(Address)

Federal Tax ID#: 522113479

Address: 300 George Street, New Haven,

New Haven County, CT 06511

Date: September 13. 2002

General Electric Capital Corporation

401 Merritt 7 Suite 23

Norwalk CT 06851-1177

Gentlemen:

You are hereby irrevocably authorized and directed to deliver and apply the proceeds of your loan to the undersigned evidenced by that Note dated Sept. 17, 2002 and secured by that Security Agreement or Chattel
Mortgage dated January 24, 2002, as follows:

General Electric

$

1,291.56

Achillion Pharmaceuticals, Inc.

$

401,681.31

This authorization and direction is given pursuant to the same authority authorizing the above-mentioned
borrowing.

Very truly yours,

Achillion Pharmaceuticals, Inc.

By:

/s/ Mary Kay Fenton

Name:

Mary Kay Fenton

Title:

Sr. Director, Finance

COLLATERAL SCHEDULE NO. 004

THIS COLLATERAL SCHEDULE NO. 004
is annexed to and made a part of that certain Master Security Agreement dated as of January 24, 2002 between General Electric Capital Corporation, together with its
successors and assigns, if any, as Secured Party and Achillion Pharmaceuticals, Inc. as Debtor and describes collateral in which Debtor has granted Secured Party a security interest in connection with the Indebtedness (as defined in the Security
Agreement) including without limitation that certain Promissory Note dated Sept. 17, 2002 in the original principal amount of $402,972.89.

Quantity

Manufacturer

Serial Number

Year/Model and Type of Equipment

SEE EXHIBIT A ATTACHED HERETO AND MADE A PART HEREOF

and including all additions, attachments, accessories and accessions thereto, and any and all substitutions, replacements or exchanges therefor, and all insurance and/or
other proceeds thereof.

SECURED PARTY:

DEBTOR:

General Electric Capital Corporation

Achillion Pharmaceuticals, Inc.

By:

/s/ Diane Hernandez

By:

/s/ Mary Kay Fenton

Name:

Diane Hernandez

Name:

Mary Kay Fenton

Title:

Vice President

Title:

Sr. Director

Date:

Date:

9/16/02

PROMISSORY NOTE

12/31/02

(Date)

FOR VALUE RECEIVED, Achillion Pharmaceuticals, Inc. a corporation located at the address stated below (
Maker
) promises, jointly and severally if more than one, to pay to the order of General
Electric Capital Corporation or any subsequent holder hereof (each, a Payee) at its office located at 401 Merritt 7 Suite 23, Norwalk, CT 06851or at such other place as Payee or the holder hereof may designate, the principal sum of
FIVE HUNDRED THIRTEEN THOUSAND EIGHT HUNDRED ELEVEN- 93/100 Dollars ($513,811.93)
, with interest on the unpaid principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of EIGHT AND ONE
Hundredths percent (8.01%) per annum, to be paid in lawful money of the United States, in Forty-Eight (48) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Thirty-Six (36)

$

13,845.63

Eleven (11)

$

7,966.20

each (periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment Shall be due and payable on Feb. 1, 2003 and the following Periodic Installments sad the final installment shall be due and payable on the same day of each succeeding month (each, a
Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment may, at the option of the Payee, be calculated and applied on an assumption that such payment would be made on its
due date.

The acceptance by Payee of any payment which is less than payment to full of all amounts due and owing at such time shall not constitute a
waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly authorizes the Payee
to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto.

This Note may be secured
by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a Security Agreement).

Time is of the essence hereof. If any installment or any other sum due under this Note or any Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to the amount of each such
installment or other sum, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of my amount due hereunder within ten
(10) days after the same becomes due and payable; or (ii) Maker is in default under, or fails to perform under any term or condition contained in any Security Agreement, them the entire principal sum remaining unpaid, together with all
accrued interest thereon and any other sum payable under

this Note or any Security Agreement, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen
percent (18%) per annum or the highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but
not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior to the twenty-fourth monthly payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%)

Thereafter and prior to the forty-eighth monthly payment of this Note: two percent (2%)

and zero percent (0%) thereafter,
plus all other sums due hereunder or under any Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws;
accordingly, it is agreed that, notwithstanding any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the
maximum amount permitted by applicable law. If any such excess interest is contacted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, ad that under any of such circumstances the
amount of interest contracted for, charged or received under this Note or any Security Agreement on the principal balance ,ball exceed the maximums amount of interest permitted by applicable law, then in such event (a) the provisions of this
paragraph shall govern and control, (b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount
of Interest permitted by applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and (d) the
effective rate of interest shall be automatically reduced to the maximum lawful contract rate slimed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be
made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or
received from Maker or otherwise by Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful
for the Payee to receive a greater interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of each amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum
interest per annum rate allowed by the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an
Obligor) who may at any time become liable for the payment hereof jointly and severally content hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of security or of any
party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit may be brought and maintained against any one or more of them,
at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each Obligor
hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting this Note
or enforcing any of the security hereof, and agrees to pay (if permuted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess of twenty percent
(20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT
IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION. CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY
RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all prior
understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its provisions or
conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose gives.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

/s/ Jennifer Stewart

By:

/s/ Mary Kay Fenton

(Witness)

Jennifer Stewart

Name:

Mary Kay Fenton

(Print Name)

300 George St. New Haven, CT 06591

Title:

Sr. Director, Finance

(Address)

Federal Tax ID#: 522113479

Address: 300 George Street, New Haven,

New Haven County, CT 06511

PROMISSORY NOTE

3/19/03

(Date)

FOR VALUE RECEIVED, Achillion Pharmaceuticals, Inc. a corporation located at the address stated below (Maker) promises, jointly and severally if more than one, to pay to the order of General Electric
Capital Corporation or any subsequent holder hereof (each, a Payee) at its office located at 401 Merritt 7 Suite 23, Norwalk, CT 06851 or at such other place as Payee or the holder hereof may designate, the principal sum of Two Hundred
Forty Five Thousand Five Hundred Three and- 17/00 Dollars ($245,503.17), with interest on the unpaid principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of Seven and Ninety Six Hundredths
percent (7.96%) per annum, to be paid in lawful money of the United States, in Forty-Fight (48) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Thirty-Six (36)

$

6,361.33

Eleven (11)

$

4,678.73

each (Periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due and payable on 5/1/03 and the following Periodic Installments and the final installment shall be due and payable on the same day of each succeeding month (each, a
Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment may, at the option of the Payee, be calculated and applied on an assumption that such payment would be made on its
due date.

The acceptance by Payee of any payment which is less than payment in full of all amounts due and owing at such time shall not constitute a
waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly authorizes the Payee
to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto.

This Note may be secured
by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a Security Agreement).

Time is of the essence hereof. If any installment or any other sum due under this Note or any Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to the amount of each such
installment or other stun, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due hereunder within ten
(10) days after the same becomes due and payable; or (ii) Maker is in default under, or fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid, together with all
accrued interest thereon and any other sum payable under this Note or any Security Agreement, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent (18%) per annum or the
highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following
percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior to the twenty-fourth monthly
payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%) Thereafter and
prior to the forty-eighth monthly payment of this Note: two percent (2%)

and zero percent (0%) thereafter, plus all other sums due hereunder or under any
Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that, notwithstanding
any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. If any
such excess interest is contracted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or
received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern and control,
(b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by applicable
law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and (d) the effective rate of interest shall be
automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the
rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by
Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater
interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an
Obligor) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of, security or of any
party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit maybe brought and maintained against any one or more of them,
at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each Obligor
hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting this Note
or enforcing any of the security hereof, and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess of twenty percent
(20%) of the amount then due shall be deemed reasonable.

THEE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all prior
understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its provisions or
conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall be deemed omitted, modified or
altered to conform thereto.

Achillion Pharmaceuticals, Inc.

/s/ Beverly Starbala

By:

/s/ Mary Kay Fenton

(Witness)

Beverly Starbala

Name:

Mary Kay Fenton

(Print Name)

300 George St., New Haven

Title:

Sr. Director, Finance

(Address)

Federal Tax ID#: 522113479

Address: 300 George Street, New Haven,

New Haven County, CT 06511

PROMISSORY NOTE

December 30, 2005

(Date)

FOR VALUE RECEIVED,
Achillion Pharmaceuticals, Inc.
a corporation located at the address stated below
(
Maker
) promises, jointly and severally if more than one, to pay to the order of
General Electric Capital Corporation
or any subsequent holder hereof (each, a 
Payee
) at its office located at
83 Wooster
Heights Road, Danbury, CT 06810
or at such other place as Payee or the holder hereof may designate, the principal sum of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000), with interest on the unpaid principal balance, from the
date hereof through and including the dates of payment, at a fixed interest rate of Ten and Ninety Two Hundredths percent (10.92%) per annum, to be paid in lawful money of the United States, in Thirty-Six (36) consecutive monthly
installments of principal and interest as follows:

Periodic
Installment

Amount

Thirty-Five (35)

$

81,014.90

each (Periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due and payable on
and the following Periodic
Installments and the final installment shall be due and payable on the same day of each succeeding month (each, a Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment
may, at the option of the Payee, be calculated and applied on an assumption that such payment would be made on its due date.

The acceptance by Payee of
any payment which is less than payment in full of all amounts due and owing at such time shall not constitute a waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly authorizes the Payee to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining
hereto.

This Note may be secured by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a
Security Agreement) dated December 30, 2005.

Time is of the essence hereof. If any installment or any other sum due under this Note or any
Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to the amount of each such installment or other sum, a late payment charge of five percent (5%) of the amount of said
installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due hereunder within ten (10) days after the same becomes due and payable; or (ii) Maker is in default under, or fails to
perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid, together with all accrued interest thereon and any other sum payable under this Note or any Security Agreement, at the election
of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent (18%) per annum or the highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before
and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following
percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior to the twenty-fourth monthly
payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%)

Thereafter and prior to the forty-eighth monthly payment of this Note: two percent (2%) and zero percent (0%) thereafter, plus all other sums due hereunder or
under any Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that,
notwithstanding any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the maximum amount permitted by
applicable law. If any such excess interest is contracted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern
and control, (b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and (d) the effective rate of interest shall
be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the
rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by
Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater
interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an

Obligor
) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of, security or of
any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit may be brought and maintained against any one or more of
them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each
Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting
this Note or enforcing any of the security hereof, and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess of twenty
percent (20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose
given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto.

(Witness)

Achillion Pharmaceuticals, Inc.

/
S
/ T
HOMAS
S. M
ENNER

By:

/
S
/ M
ARY
K
AY
F
ENTON

Thomas s. Menner

Name:

Mary Kay Fenton

(Print Name) Thomas S. Menner

Title:

Vice President, Finance

1381 Farmington Ave., W. Hartford, CT

(Address)

Federal Tax ID #: 522113479

Address: 300 George Street, New Haven,

New Haven
County, CT 06511

PROMISSORY NOTE

May 12, 2006

(Date)

FOR VALUE RECEIVED,
Achillion Pharmaceuticals, Inc.
a corporation located at the address stated below (
Maker
) promises, jointly and severally if more than one, to pay to the order of
General Electric Capital Corporation
or any subsequent holder hereof (each, a 
Payee
) at its office located at
83 Wooster Heights Road, Danbury, CT 06810
or at such other place as Payee or the holder hereof may
designate, the principal sum of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00), with interest on the unpaid principal balance, from the date hereof through and including the dates of payment, at a fixed interest rate of Eleven
and Fifty Six Hundredths percent (11.56%) per annum, to be paid in lawful money of the United States, in Thirty-Six (36) consecutive monthly installments of principal and interest as follows:

Periodic Installment

Amount

Thirty-Five (35)

$

81,724.05

each (Periodic Installment) and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due and payable on June 1, 2006 and the following Periodic Installments and the final installment shall be due and payable on the same day of each succeeding month
(each, a Payment Date). Such installments have been calculated on the basis of a 360 day year of twelve 30-day months. Each payment may, at the option of the Payee, be calculated and applied on an assumption that such payment would be
made on its due date.

The acceptance by Payee of any payment which is less than payment in full of all amounts due and owing at such time shall not
constitute a waiver of Payees right to receive payment in full at such time or at any prior or subsequent time.

The Maker hereby expressly
authorizes the Payee to insert the date value is actually given in the blank space on the face hereof and on all related documents pertaining hereto.

This
Note may be secured by a security agreement, chattel mortgage, pledge agreement or like instrument (each of which is hereinafter called a Security Agreement).

Time is of the essence hereof. If any installment or any other sum due under this Note or any Security Agreement is not received within ten (10) days after its due date, the Maker agrees to pay, in addition to
the amount of each such installment or other sum, a late payment charge of five percent (5%) of the amount of said installment or other sum, but not exceeding any lawful maximum. If (i) Maker fails to make payment of any amount due
hereunder within ten (10) days after the same becomes due and payable; or (ii) Maker is in default under, or fails to perform under any term or condition contained in any Security Agreement, then the entire principal sum remaining unpaid,
together with all accrued interest thereon and any other sum payable under this Note or any Security Agreement, at the election of Payee, shall immediately become due and payable, with interest thereon at the lesser of eighteen percent (18%)
per annum or the highest rate not prohibited by applicable law from the date of such accelerated maturity until paid (both before and after any judgment).

Prior to the eighteenth month of this Note, Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of the then outstanding gross amount due. Thereafter, Maker may prepay in full, but not in part, its entire indebtedness hereunder upon payment of the entire indebtedness plus an additional sum as a premium equal to the following
percentages of the then outstanding principal balance for the indicated period:

Following the eighteenth month but prior to the twenty-fourth monthly
payment of this Note: four percent (4%)

Thereafter and prior to the thirty-sixth monthly payment of this Note: three percent (3%)

Thereafter and prior to the forty-eighth monthly payment of this Note: two percent (2%) and zero percent (0%) thereafter, plus all other sums due hereunder or
under any Security Agreement.

It is the intention of the parties hereto to comply with the applicable usury laws; accordingly, it is agreed that,
notwithstanding any provision to the contrary in this Note or any Security Agreement, in no event shall this Note or any Security Agreement require the payment or permit the collection of interest in excess of the maximum amount permitted by
applicable law. If any such excess interest is contracted for, charged or received under this Note or any Security Agreement, or if all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest
contracted for, charged or received under this Note or any Security Agreement on the principal balance shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern
and control, (b) neither Maker nor any other person or entity now or hereafter liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Maker, at the option of the Payee, and (d) the effective rate of interest shall
be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the
rate of interest contracted for, charged or received under this Note or any Security Agreement which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by
applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Maker or otherwise by
Payee in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for the Payee to receive a greater
interest per annum rate than is presently allowed, the Maker agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.

The Maker and all sureties, endorsers, guarantors or any others (each such person, other than the Maker, an

Obligor
) who may at any time become liable for the payment hereof jointly and severally consent hereby to any and all extensions of time, renewals, waivers or modifications of, and all substitutions or releases of, security or of
any party primarily or secondarily liable on this Note or any Security Agreement or any term and provision of either, which may be made, granted or consented to by Payee, and agree that suit may be brought and maintained against any one or more of
them, at the election of Payee without joinder of any other as a party thereto, and that Payee shall not be required first to foreclose, proceed against, or exhaust any security hereof in order to enforce payment of this Note. The Maker and each
Obligor hereby waives presentment, demand for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection herewith, as well as filing of suit (if permitted by law) and diligence in collecting
this Note or enforcing any of the security hereof, and agrees to pay (if permitted by law) all expenses incurred in collection, including Payees actual attorneys fees. Maker and each Obligor agrees that fees not in excess of twenty
percent (20%) of the amount then due shall be deemed reasonable.

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

This Note and any Security Agreement constitute the entire agreement of the Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.

No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an authorized representative of Maker and Payee. Any such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose
given.

Any provision in this Note or any Security Agreement which is in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto.

Achillion Pharmaceuticals, Inc.

/s/ Marita Khein

By:

/s/ Mary Kay Fenton

(Witness)

Marita Khein

Name:

Mary Kay Fenton

300 George St., New Haven, CT 06511

Title:

Vice President, Finance

(Address)

Federal Tax ID #: 522113479

Address:

300 George Street, New Haven,

New Haven County, CT
06511

MASTER SECURITY AGREEMENT

dated as of January 24, 2002 (Agreement)

THIS AGREEMENT
is
between
General Electric Capital Corporation
(together with its successors and assigns, if any, 
Secured Party
) and
Achillion Pharmaceuticals, Inc.
(
Debtor
). Secured Party has an office at 401
Merritt 7 Suite 23, Norwalk, CT 06851. Debtor is a corporation organized and existing under the laws of the state of Delaware. Debtors mailing address and chief place of business is 300 George Street, New Haven, CT 06511.

1.

CREATION OF SECURITY INTEREST.

Debtor grants to
Secured Party, its successors and assigns, a security interest in and against all property listed on any collateral schedule now or in the future annexed to or made a part of this Agreement (
Collateral Schedule
), and in and
against all additions, attachments, accessories and accessions to such property, all substitutions, replacements or exchanges therefor, and all insurance and/or other proceeds thereof (all such property is individually and collectively called the

Collateral
). This security interest is given to secure the payment and performance of all debts, obligations and liabilities of any kind whatsoever of Debtor to Secured Party, now existing or arising in the future, including but
not limited to the payment and performance of certain Promissory Notes from time to time identified on any Collateral Schedule (collectively 
Notes
 and each a 
Note
), and any renewals, extensions and modifications
of such debts, obligations and liabilities (such Notes, debts, obligations and liabilities are called the 
Indebtedness
). Unless otherwise provided by applicable law, notwithstanding anything to the contrary contained in this
Agreement, to the extent that Secured Party asserts a purchase money security interest in any items of Collateral (
PMSI Collateral
): (i) the PMSI Collateral shall secure only that portion of the Indebtedness which has been
advanced by Secured Party to enable Debtor to purchase, or acquire rights in or the use of such PMSI Collateral (the 
PMSI Indebtedness
), and (ii) no other Collateral shall secure the PMSI Indebtedness.

2.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.

Debtor represents, warrants and covenants as of the date of this Agreement and as of the date of each Collateral Schedule that:

(a) Debtors exact legal name is as set forth in the preamble of this Agreement and Debtor is, and will remain, duly organized, existing and in good standing under the laws of the State set forth in the preamble of this Agreement, has
its chief executive offices at the location specified in the preamble, and is, and will remain, duly qualified and licensed in every jurisdiction wherever necessary to carry on its business and operations;

(b) Debtor has adequate power and capacity to enter into, and to perform its obligations under this Agreement, each Note and any other documents
evidencing, or given in connection with, any of the Indebtedness (all of the foregoing are called the 
Debt Documents
);

(c) This Agreement and the other Debt Documents have been duly authorized, executed and delivered by Debtor and constitute legal, valid and binding agreements enforceable in accordance with their terms, except to the extent that the
enforcement of remedies may be limited under applicable bankruptcy and insolvency laws;

(d) No approval, consent or withholding of objections is required from any governmental authority or
instrumentality with respect to the entry into, or performance by Debtor of any of the Debt Documents, except any already obtained;

(e)
The entry into, and performance by, Debtor of the Debt Documents will not (i) violate any of the organizational documents of Debtor or any judgment, order, law or regulation applicable to Debtor, or (ii) result in any breach of or
constitute a default under any contract to which Debtor is a party, or result in the creation of any lien, claim or encumbrance on any of Debtors property (except for liens in favor of Secured Party) pursuant to any indenture, mortgage, deed
of trust, bank loan, credit agreement, or other agreement or instrument to which Debtor is a party;

(f) There are no suits or proceedings
pending in court or before any commission, board or other administrative agency against or affecting Debtor which could, in the aggregate, have a material adverse effect on Debtor, its business or operations, or its ability to perform its
obligations under the Debt Documents, nor does Debtor have reason to believe that any such suits or proceedings are threatened;

(g) All
financial statements delivered to Secured Party in connection with the Indebtedness have been prepared in accordance with generally accepted accounting principles, and since the date of the most recent financial statement, there has been no material
adverse change in Debtors financial condition;

(h) The Collateral is not, and will not be, used by Debtor for personal, family or
household purposes;

(i) The Collateral is, and will remain, in good condition and repair and Debtor will not be negligent in its care and
use;

(j) Debtor is, and will remain, the sole and lawful owner, and in possession of, the Collateral, and has the sole right and lawful
authority to grant the security interest described in this Agreement; and

(k) The Collateral is, and will remain, free and clear of all
liens, claims and encumbrances of any kind whatsoever, except for (i) liens in favor of Secured Party, (ii) liens for taxes not yet due or for taxes being contested in good faith and which do not involve, in the judgment of Secured Party,
any risk of the sale, forfeiture or loss of any of the Collateral, and (iii) inchoate materialmens, mechanics, repairmens and similar liens arising by operation of law in the normal course of business for amounts which are not
delinquent (all of such liens are called 
Permitted Liens
).

3.

COLLATERAL.

(a) Until the declaration of any
default, Debtor shall remain in possession of the Collateral; except that Secured Party shall have the right to possess (i) any chattel paper or instrument that constitutes a part of the Collateral, and (ii) any other Collateral in which
Secured Partys security interest may be perfected only by possession. Secured Party may inspect any of the Collateral during normal business hours after giving Debtor reasonable prior notice. If Secured Party asks, Debtor will promptly notify
Secured Party in writing of the location of any Collateral.

(b) Debtor shall (i) use the Collateral only in its trade or business,
(ii) maintain all of the Collateral in good operating order and repair, normal wear and tear excepted, (iii) use and maintain the Collateral only in compliance with manufacturers recommendations and all applicable laws, and (iv) keep
all of the Collateral free and clear of all liens, claims and encumbrances (except for Permitted Liens).

(c) Secured Party does not
authorize and Debtor agrees it shall not (i) part with possession of any of the Collateral (except to Secured Party or for maintenance and repair), (ii) remove any of the Collateral from the continental United States, or (iii) sell,
rent, lease, mortgage, license, grant a security interest in or otherwise transfer or encumber (except for Permitted Liens) any of the Collateral.

(d) Debtor shall pay promptly when due all taxes, license fees, assessments and public and private charges levied or assessed on any of the Collateral, on its use, or on this Agreement or any of the other Debt Documents. At its option,
Secured Party may discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral and may pay for the maintenance, insurance and preservation of the Collateral and effect compliance with the terms of
this Agreement or any of the other Debt Documents. Debtor agrees to reimburse Secured Party, on demand, all costs and expenses incurred by Secured Party in connection with such payment or performance and agrees that such reimbursement obligation
shall constitute Indebtedness.

(e) Debtor shall, at all times, keep accurate and complete records of the Collateral, and Secured Party
shall have the right to inspect and make copies of all of Debtors books and records relating to the Collateral during normal business hours, after giving Debtor reasonable prior notice.

(f) Debtor agrees and acknowledges that any third person who may at any time possess all or any portion of the Collateral shall be deemed to hold, and
shall hold, the Collateral as the agent of, and as pledge holder for, Secured Party. Secured Party may at any time give notice to any third person described in the preceding sentence that such third person is holding the Collateral as the agent of,
and as pledge holder for, the Secured Party.

4.

INSURANCE.

(a) Debtor shall at all times bear the
entire risk of any loss, theft, damage to, or destruction of, any of the Collateral from any cause whatsoever.

(b) Debtor agrees to keep the Collateral insured against loss or damage by fire and extended coverage
perils, theft, burglary, and for any or all Collateral which are vehicles, for risk of loss by collision, and if requested by Secured Party, against such other risks as Secured Party may reasonably require. The insurance coverage shall be in an
amount no less than the full replacement value of the Collateral, and deductible amounts, insurers and policies shall be acceptable to Secured Party. Debtor shall deliver to Secured Party policies or certificates of insurance evidencing such
coverage. Each policy shall name Secured Party as a loss payee, shall provide for coverage to Secured Party regardless of the breach by Debtor of any warranty or representation made therein, shall not be subject to co-insurance, and shall provide
that coverage may not be canceled or altered by the insurer except upon thirty (30) days prior written notice to Secured Party. Debtor appoints Secured Party as its attorney-in-fact to make proof of loss, claim for insurance and adjustments
with insurers, and to receive payment of and execute or endorse all documents, checks or drafts in connection with insurance payments. Secured Party shall not act as Debtors attorney-in-fact unless Debtor is in default. Proceeds of insurance
shall be applied, at the option of Secured Party, to repair or replace the Collateral or to reduce any of the Indebtedness.

5.

REPORTS.

(a) Debtor shall promptly notify Secured
Party of (i) any change in the name of Debtor, (ii) any change in the state of its incorporation or registration, (iii) any relocation of its chief executive offices, (iv) any relocation of any of the Collateral, (v) any of
the Collateral being lost, stolen, missing, destroyed, materially damaged or worn out, or (vi) any lien, claim or encumbrance other than Permitted Liens attaching to or being made against any of the Collateral.

(b) Debtor will deliver to Secured Party Debtors complete financial statements, certified by a recognized firm of certified public accountants,
within ninety (90) days of the close of each fiscal year of Debtor. If Secured Party requests, Debtor will deliver to Secured Party copies of Debtors quarterly financial reports certified by Debtors chief financial officer, within
ninety (90) days after the close of each of Debtors fiscal quarter. Debtor will deliver to Secured Party copies of all Forms 10-K and 10-Q, if any, within 30 days after the dates on which they are filed with the Securities and Exchange
Commission.

6.

FURTHER ASSURANCES.

(a) Debtor shall, upon request
of Secured Party, furnish to Secured Party such further information, execute and deliver to Secured Party such documents and instruments (including, without limitation, Uniform Commercial Code financing statements) and shall do such other acts and
things as Secured Party may at any time reasonably request relating to the perfection or protection of the security interest created by this Agreement or for the purpose of carrying out the intent of this Agreement. Without limiting the foregoing,
Debtor shall cooperate and do all acts deemed necessary or advisable by Secured Party to continue in Secured Party a perfected first security interest in the Collateral, and shall obtain and furnish to Secured Party any subordinations, releases,
landlord waivers, lessor waivers, mortgagee waivers, or control agreements, and similar documents as may be from time to time requested by, and in form and substance satisfactory to, Secured Party.

(b) Debtor authorizes Secured Party to file a financing statement and amendments thereto describing the
Collateral and containing any other information required by the applicable Uniform Commercial Code. Debtor irrevocably grants to Secured Party the power to sign Debtors name and generally to act on behalf of Debtor to execute and file
applications for title, transfers of title, financing statements, notices of lien and other documents pertaining to any or all of the Collateral; this power is coupled with Secured Partys interest in the Collateral. Debtor shall, if any
certificate of title be required or permitted by law for any of the Collateral, obtain and promptly deliver to Secured Party such certificate showing the lien of this Agreement with respect to the Collateral. Debtor ratifies its prior authorization
for Secured Party to file financing statements and amendments thereto describing the Collateral and containing any other information required by the Uniform Commercial Code if filed prior to the date hereof.

(c) Debtor shall indemnify and defend the Secured Party, its successors and assigns, and their respective directors, officers and employees, from and
against all claims, actions and suits (including, without limitation, related attorneys fees) of any kind whatsoever arising, directly or indirectly, in connection with any of the Collateral.

7.

DEFAULT AND REMEDIES.

(a) Debtor shall be in
default under this Agreement and each of the other Debt Documents if:

(i) Debtor breaches its obligation to pay when due
any installment or other amount due or coming due under any of the Debt Documents;

(ii) Debtor, without the prior written
consent of Secured Party, attempts to or does sell, rent, lease, license, mortgage, grant a security interest in, or otherwise transfer or encumber (except for Permitted Liens) any of the Collateral;

(iii) Debtor breaches any of its insurance obligations under Section 4;

(iv) Debtor breaches any of its other obligations under any of the Debt Documents and fails to cure that breach within thirty
(30) days after written notice from Secured Party;

(v) Any warranty, representation or statement made by Debtor in any
of the Debt Documents or otherwise in connection with any of the Indebtedness shall be false or misleading in any material respect;

(vi) Any of the Collateral is subjected to attachment, execution, levy, seizure or confiscation in any legal proceeding or otherwise, or if any legal or administrative proceeding is commenced against Debtor or any of the Collateral, which
in the good faith judgment of Secured Party subjects any of the Collateral to a material risk of attachment, execution, levy, seizure or confiscation and no bond is posted or protective order obtained to negate such risk;

(vii) Debtor breaches or is in default under any other agreement between Debtor and Secured Party;

(viii) Debtor or any guarantor or other obligor for any of the Indebtedness (collectively

Guarantor
) dissolves, terminates its existence, becomes insolvent or ceases to do business as a going concern;

(ix) If Debtor or any Guarantor is a natural person, Debtor or any such Guarantor dies or becomes incompetent;

(x)
A receiver is appointed for all or of any part of the property of Debtor or any Guarantor, or Debtor or any Guarantor makes any assignment for the benefit of creditors;

(xi) Debtor or any Guarantor files a petition under any bankruptcy, insolvency or similar law, or any such petition is filed against
Debtor or any Guarantor and is not dismissed within forty-five (45) days; or

(xii) Debtors improper filing of an
amendment or termination statement relating to a filed financing statement describing the Collateral.

(b) If Debtor is in default, the
Secured Party, at its option, may declare any or all of the Indebtedness to be immediately due and payable, without demand or notice to Debtor or any Guarantor. The accelerated obligations and liabilities shall bear interest (both before and after
any judgment) until paid in full at the lower of eighteen percent (18%) per annum or the maximum rate not prohibited by applicable law.

(c) After default, Secured Party shall have all of the rights and remedies of a Secured Party under the Uniform Commercial Code, and under any other applicable law. Without limiting the foregoing, Secured Party shall have the right to
(i) notify any account debtor of Debtor or any obligor on any instrument which constitutes part of the Collateral to make payment to the Secured Party, (ii) with or without legal process, enter any premises where the Collateral may be and
take possession of and remove the Collateral from the premises or store it on the premises, (iii) sell the Collateral at public or private sale, in whole or in part, and have the right to bid and purchase at said sale, or (iv) lease or
otherwise dispose of all or part of the Collateral, applying proceeds from such disposition to the obligations then in default. If requested by Secured Party, Debtor shall promptly assemble the Collateral and make it available to Secured Party at a
place to be designated by Secured Party which is reasonably convenient to both parties. Secured Party may also render any or all of the Collateral unusable at the Debtors premises and may dispose of such Collateral on such premises without
liability for rent or costs. Any notice that Secured Party is required to give to Debtor under the Uniform Commercial Code of the time and place of any public sale or the time after which any private sale or other intended disposition of the
Collateral is to be made shall be deemed to constitute reasonable notice if such notice is given to the last known address of Debtor at least five (5) days prior to such action.

(d) Proceeds from any sale or lease or other disposition shall be applied: first, to all costs of repossession, storage, and disposition including
without limitation attorneys, appraisers, and auctioneers fees; second, to discharge the obligations then in default; third, to discharge any other Indebtedness of Debtor to Secured Party, whether as obligor, endorser, guarantor,
surety or indemnitor; fourth, to expenses incurred in paying or settling liens and claims against the Collateral; and lastly, to Debtor, if there exists any surplus. Debtor shall remain fully liable for any deficiency.

(e) Debtor agrees to pay all reasonable attorneys fees and other costs incurred by Secured Party in
connection with the enforcement, assertion, defense or preservation of Secured Partys rights and remedies under this Agreement, or if prohibited by law, such lesser sum as may be permitted. Debtor further agrees that such fees and costs shall
constitute Indebtedness.

(f) Secured Partys rights and remedies under this Agreement or otherwise arising are cumulative and may be
exercised singularly or concurrently. Neither the failure nor any delay on the part of the Secured Party to exercise any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right,
power or privilege preclude any other or further exercise of that or any other right, power or privilege. SECURED PARTY SHALL NOT BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OTHER AGREEMENT, INSTRUMENT OR PAPER
SIGNED BY DEBTOR UNLESS SUCH WAIVER IS EXPRESSED IN WRITING AND SIGNED BY SECURED PARTY. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion.

(g) DEBTOR AND SECURED PARTY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING
ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION.
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

8.

MISCELLANEOUS.

(a) This Agreement, any Note and/or
any of the other Debt Documents may be assigned, in whole or in part, by Secured Party without notice to Debtor, and Debtor agrees not to assert against any such assignee, or assignees assigns, any defense, set-off, recoupment claim or
counterclaim which Debtor has or may at any time have against Secured Party for any reason whatsoever. Debtor agrees that if Debtor receives written notice of an assignment from Secured Party, Debtor will pay all amounts payable under any assigned
Debt Documents to such assignee or as instructed by Secured Party. Debtor also agrees to confirm in writing receipt of the notice of assignment as may be reasonably requested by Secured Party or assignee.

(b) All notices to be given in connection with this Agreement shall be in writing, shall be addressed to
the parties at their respective addresses set forth in this Agreement (unless and until a different address may be specified in a written notice to the other party), and shall be deemed given (i) on the date of receipt if delivered in hand or
by facsimile transmission, (ii) on the next business day after being sent by express mail, and (iii) on the fourth business day after being sent by regular, registered or certified mail. As used herein, the term business day
shall mean and include any day other than Saturdays, Sundays, or other days on which commercial banks in New York, New York are required or authorized to be closed.

(c) Secured Party may correct patent errors and fill in all blanks in this Agreement or in any Collateral Schedule consistent with the agreement of the parties.

(d) Time is of the essence of this Agreement. This Agreement shall be binding, jointly and severally, upon all parties described as the
Debtor and their respective heirs, executors, representatives, successors and assigns, and shall inure to the benefit of Secured Party, its successors and assigns.

(e) This Agreement and its Collateral Schedules constitute the entire agreement between the parties with respect to the subject matter of this Agreement
and supersede all prior understandings (whether written, verbal or implied) with respect to such subject matter. THIS AGREEMENT AND ITS COLLATERAL SCHEDULES SHALL NOT BE CHANGED OR TERMINATED ORALLY OR BY COURSE OF CONDUCT, BUT ONLY BY A WRITING
SIGNED BY BOTH PARTIES. Section headings contained in this Agreement have been included for convenience only, and shall not affect the construction or interpretation of this Agreement.

(f) This Agreement shall continue in full force and effect until all of the Indebtedness has been indefeasibly paid in full to Secured Party or its
assignee. The surrender, upon payment or otherwise, of any Note or any of the other documents evidencing any of the Indebtedness shall not affect the right of Secured Party to retain the Collateral for such other Indebtedness as may then exist or as
it may be reasonably contemplated will exist in the future. This Agreement shall automatically be reinstated if Secured Party is ever required to return or restore the payment of all or any portion of the Indebtedness (all as though such payment had
never been made).

(g) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE
EQUIPMENT.

IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally bound hereby, have duly executed
this Agreement one or more counterparts, each of which shall be deemed to be an original, as of the day and year first aforesaid.

SECURED PARTY:

DEBTOR:

General Electric Capital Corporation

Achillio Pharmaceuticals, Inc.

By:

/
S
/ D
IANE
H
ERNANDEZ

By:

/
S
/ M
ARY
K
AY
F
ENTON

Name:

Diane Hernandez

Name:

Mary Kay Fenton

Title:

Vice President

Title:

Sr. Director, Finance

CONSENT AND WAIVER

WHEREAS, Achillion Pharmaceuticals, Inc. (the Company) entered into a Loan Agreement (the Loan Agreement), dated as of March 30, 2001, with Connecticut Innovations, Inc. (CII);
and

WHEREAS, pursuant to Section 3 of the Loan Agreement, the Companys Obligations (as defined in the Loan Agreement) under the
Loan Agreement are secured by, among other things, furniture, fixtures and equipment located on the Leased Premises (as defined in the Loan Agreement) not subject to a security interest at the time of the Term Loan (as defined in the Loan
Agreement); and

WHEREAS, pursuant to Section 8.1 of the Loan Agreement, the Company may not create, assume, incur or permit to exist,
any mortgage, lien, pledge, charge, security interest or other encumbrance of any kind in respect of the Collateral (as defined in the Loan Agreement); and

WHEREAS, the Company wishes to enter into a Master Security Agreement (the Security Agreement) with General Electric Capital Corporation (GE), pursuant to which the Company shall grant to GE a
security interest in and against certain property (the GE Collateral) which will be located on the Leased Premises (as defined in the Loan Agreement); and

WHEREAS, CII wishes to facilitate the execution of the Security Agreement and the granting of the security interest to GE contemplated therein.

NOW, THEREFORE,

Pursuant to
Section 12.2.1, CII hereby (i) waives its right to a first priority security interest in the GE Collateral, and (ii) consents to the granting to GE of the security interest in the GE Collateral contemplated by the Security agreement.

This Consent and Waiver may be executed in several counterparts, each of which shall constitute an original and all of which, when taken
together, shall constitute one and the same instrument.

[Remainder of page is intentionally left blank]

IN WITNESS THEREOF, this Consent and Waiver is
dated as of the 20
th
day of March 2002.

CONNECTICUT INNOVATIONS, INCORPORATED

By:

/
S
/ R
ICHARD
R. B
ARREDO

Name:

Richard R. Barredo

Title:

Managing Director/Project Finance

Address:

99 West Street

Rocky Hill, CT 06067

AMENDMENT

THIS AMENDMENT is made as of the
day of
, 2002, between General Electric Capital Corporation (Secured Party) and Achillion Pharmaceuticals, Inc.
(Debtor) in connection with that certain Master Security Agreement, dated as of January 24, 2002 (Agreement). The terms of this Amendment are hereby incorporated into the Agreement as though fully set forth therein.
Section references below refer to the section numbers of the Agreement. The Agreement is hereby amended as follows:

1.

CREATION OF SECURITY INTEREST
.

The Section
is hereby amended and replaced with the following:

Debtor grants to Secured Party, its successors and assigns, a security interest in
and against all property listed on any collateral schedule now or in the future annexed to or made a part of this Agreement (
Collateral Schedule
), and in and against all additions, attachments, accessories and accessions to such
property, all substitutions, replacements or exchanges therefor, and all insurance and/or other proceeds thereof (all such property is individually and collectively called the 
Collateral
). This security interest is given to secure
the payment and performance of all debts, obligations and liabilities of any kind whatsoever of Debtor to Secured Party, other than any obligations of Debtor to Secured Party in connection with any agreements executed between Secured Party and
Debtor in connection with Secured Partys purchase of Debtors Series C Convertible Preferred Stock, now existing or arising in the future, including but not limited to the payment and performance of certain Promissory Notes from time to
time identified on any Collateral Schedule (collectively 
Notes
 and each a 
Note
), and any renewals, extensions and modifications of such debts, obligations and liabilities (such Notes, debts, obligations and
liabilities are called the 
Indebtedness
). Unless otherwise provided by applicable law, notwithstanding anything to the contrary contained in this Agreement, to the extent that Secured Party asserts a purchase money security
interest in any items of Collateral (
PMSI Collateral
): (i) the PMSI Collateral shall secure only that portion of the Indebtedness which has been advanced by Secured Party to enable Debtor to purchase, or acquire rights in or
the use of such PMSI Collateral (the 
PMSI Indebtedness
), and (ii) no other Collateral shall secure the PMSI Indebtedness.

2.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR
.

The first sentence of this Section is hereby amended and replaced with the following:

Debtor represents, warrants and
covenants as of the date of this Agreement and as of the date of each Collateral Schedule, unless specifically otherwise disclosed, that:

Subsection (b) is hereby amended and replaced with the following:

Debtor has adequate power and capacity to enter into, and to perform its obligations under this Agreement, each Note and any other documents
evidencing, or given in connection with, any of the Indebtedness (all of the foregoing, excluding the Warrant, are called the 
Debt Documents
);

Subsection (c) is hereby amended and replaced with the following:

This Agreement and the other
Debt Documents have been duly authorized, executed and delivered by Debtor and constitute legal, valid and binding agreements enforceable in accordance with their terms, except to the extent that the enforcement of remedies may be limited under
applicable bankruptcy and insolvency laws and equitable remedies;

3.

COLLATERAL
.

Subsection (a) is hereby
amended and replaced with the following:

Until the occurrence and continuance of any default under Section 7, Debtor shall
remain in possession of the Collateral; except that Secured Party shall have the right to possess (i) any chattel paper or instrument that constitutes a part of the Collateral, and (ii) any other Collateral in which Secured Partys
security interest may be perfected only by possession. Secured Party may inspect any of the Collateral during normal business hours after giving Debtor reasonable prior notice. If Secured Party asks, Debtor will promptly notify Secured Party in
writing of the location of any Collateral.

Subsection (d) is hereby amended and replaced with the following:

Debtor shall pay promptly when due all taxes, license fees, assessments and public and private charges levied or assessed on any of the Collateral,
on its use, or on this Agreement or any of the other Debt Documents. At its option, Secured Party may discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral and may pay for the maintenance,
insurance and preservation of the Collateral and effect compliance with the terms of this Agreement or any of the other Debt Documents. Debtor agrees to reimburse Secured Party, on demand, all reasonable costs and expenses incurred by Secured Party
in connection with such payment or performance and agrees that such reimbursement obligation shall constitute Indebtedness.

7.

DEFAULT AND REMEDIES.

Section (a) is hereby
amended and replaced with the following:

Debtor shall be in default under this Agreement and each of the other Debt Documents if (and
so long as is continuing):

Section (a)(i) is hereby amended and replaced with the following:

Debtor breaches its obligation to pay when due any installment or other amount due or coming due under any of the Debt Documents unless such failure
to pay on the required due date is as a result of the error or malfunction of any electronic payment system or other system established for the electronic transfer of funds. If the error or malfunction of any electronic payment system or other
system persists for more than three (3) days, Debtor agrees to immediately send payment to Secured Party via wire transfer or overnight mail

Subsection (a)(v) is hereby amended and replaced with the following:

Any warranty,
representation or statement made by Debtor in any of the Debt Documents or otherwise in connection with any of the Indebtedness shall be false or misleading in any material respect when made;

Subsection (a)(xi) is hereby amended and replaced with the following:

Debtor or any Guarantor files a petition under any bankruptcy, insolvency or similar law, or any such petition is filed against Debtor or any Guarantor and is not dismissed within sixty (60) days; or

Subsection (c) is hereby amended and replaced with the following:

After default, Secured Party shall have all of the rights and remedies of a Secured Party under the Uniform Commercial Code, and under any other
applicable law. Without limiting the foregoing, Secured Party shall have the right to (i) notify any account debtor of Debtor or any obligor on any instrument which constitutes part of the Collateral to make payment to the Secured Party,
(ii) with or without legal process, enter any premises where the Collateral may be and take possession of and remove the Collateral from the premises or store it on the premises, (iii) sell

the Collateral at public or private sale, in whole or in part, and have the right to bid and purchase at said sale, or (iv) lease or otherwise dispose
of all or part of the Collateral, applying proceeds from such disposition to the obligations then in default. If requested by Secured Party, Debtor shall promptly assemble the Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to both parties. Secured Party may also render any or all of the Collateral unusable at the Debtors premises and may dispose of such Collateral on such premises without liability for
rent or costs. Any notice that Secured Party is required to give to Debtor under the Uniform Commercial Code of the time and place of any public sale or the time after which any private sale or other intended disposition of the Collateral is to be
made shall be deemed to constitute reasonable notice if such notice is given to the last known address of Debtor at least ten (10) days prior to such action.

8.

MISCELLANEOUS
.

Section (b) is hereby
amended and replaced with the following:

All notices to be given in connection with this Agreement shall be in writing, shall be
addressed to the parties at their respective addresses set forth in this Agreement (unless and until a different address may be specified in a written notice to the other party), and shall be deemed given (i) on the date of receipt if delivered
in hand or by facsimile transmission, (ii) on the next business day after being sent by express mail, and (iii) on the fourth business day after being sent by regular, registered or certified mail. As used herein, the term business
day shall mean and include any day other than Saturdays, Sundays, or other days on which commercial banks in New Haven, Connecticut are required or authorized to be closed.

TERMS USED, BUT NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN TO THEM IN THE AGREEMENT. EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT
SHALL REMAIN IN FULL FORCE AND EFFECT. IF THERE IS ANY CONFLICT BETWEEN THE PROVISIONS OF THE AGREEMENT AND THIS AMENDMENT, THEN THIS AMENDMENT SHALL CONTROL.

IN WITNESS WHEREOF
, the parties hereto have executed this Amendment simultaneously with the
Agreement by signature of their respective authorized representative set forth below.

General Electric Capital Corporation

Achillio Pharmaceuticals, Inc.

By:

/
S
/ J
OHN
E
DER

By:

/
S
/ M
ARY
K
AY
F
ENTON

Name:

John Eder

Name:

Mary Kay Fenton

Title:

Senior Vice President

Title:

Sr. Director, Finance

AMENDMENT NO. 3

THIS AMENDMENT NO. 3 is made as of the 30th day of December 2005, between General Electric Capital Corporation (Secured Party) and
Achillion Pharmaceuticals, Inc. (Debtor) in connection with that certain Master Security Agreement, dated as of March 21, 2002, as amended by Amendment dated as of March 21, 2002 (Agreement). The terms of this
Amendment No. 3 are hereby incorporated into the Agreement as though fully set forth therein. Secured Party and Debtor mutually desire to amend the Agreement as set forth below. Section references below refer to the section numbers of the
Agreement.

Subsections 1(b) is hereby added to the existing paragraph (now to be identified as 1(a) and reads as follows:

(b) With this Amendment, Debtor is, and Secured Party acknowledges, entering into a similar financing with Oxford Finance Corporation, which
will be referred to as Oxford, or, together with Secured Party, will be referenced as Secured Parties. Oxford and Secured Party are entering into an Intercreditor Agreement of same date as used in this Amendment. The
Intercreditor Agreement sets forth the relative priority of Secured Parties with respect to the security interests in the Collateral (as there defined) and allocates the distribution or any proceeds from any sale or disposition of the Collateral.

Subsections 2(e)(k)(1) and (m) are hereby added and read as follows:

(e) The entry into, and performance by, Debtor of the Debt Documents will not (i) violate any of the organizational documents of Debtor or
any judgment, order, law or regulation applicable to Debtor, or (ii) result in any breach of or constitute a default under any contract to which Debtor is a party, or result in the creation of any lien, claim or encumbrance on any of
Debtors property (except for liens in favor of Secured Parties) pursuant to any indenture, mortgage, deed of trust, bank loan, credit agreement, or other agreement or instrument to which Debtor is a party;

(k) The Collateral is, and will remain, free and clear of all liens, claims and encumbrances of any kind whatsoever, except for (i) liens in
favor of Secured Parties, (ii) liens for taxes not yet due or for taxes being contested in good faith and which do not involve, in the judgment of Secured Parties, any risk of the sale, forfeiture or loss of any of the Collateral, and
(iii) inchoate materialmens, mechanics, repairmens and similar liens arising by operation of law in the normal course of business for amounts which are not delinquent, and (iv) Debtors fulfillment of its obligations
pursuant to its collaboration agreement with Gilead Sciences, Inc. (all of such liens are called 
Permitted Liens
);

(l) Debtors Intellectual Property, as defined in Section 7 below, is and will remain free and clear of all liens, claims and encumbrances of any kind whatsoever, except for Permitted Liens as defined in subsection (k)
of this Section; and

(m) Debtor has not and will not enter into any other agreement or financing arrangement, other than with Secured
Parties, in which it granted a negative pledge in Debtors Intellectual Property to any other party.

(n) To the extent Secured Party has outstanding balances with Debtor, Secured Party will have a
right to first proceeds under any permitted sale or transfer of Intellectual Property as set forth in the Intercreditor Agreement.

Subsections 7(a)(xiii) through (xvii) are hereby added and read as follows:

(xiii) There is a material
adverse change in the Debtors financial condition as determined reasonably by Secured Party (Secured Party acknowledges that cash bum alone by Debtor shall not be deemed a material adverse change if such cash burn does not
materially exceed the cash burn projections provided to Secured Party as of December 30, 2005);

(xiv) Any Guarantor revokes or
attempts to revoke its guaranty of any of the Indebtedness or fails to observe or perform any covenant, condition or agreement to be performed under any guaranty or other related document to which it is a party;

(xv) Debtor defaults under any other material obligation for (A) borrowed money, (B) the deferred purchase price of property or
(C) payments due under any lease agreement;

(xvi) At any time during the term of this Agreement Debtor experiences a change of
control such that any person or entity acquires either more than 50% or the voting stock of Debtor or all or substantially all of Debtors assets, in either case, without Secured Partys prior written consent; or

(xvii) Debtor or any guarantor or other obligor for any of the Indebtedness sells, transfers, assigns, mortgages, pledges, leases, grants a security
interest in or encumbers any or all of Debtors Intellectual Property now existing or hereafter acquired. Intellectual Property shall consist of but not be limited to any and all owned or licensed patents, trademarks and copyrights. For
purposes of this paragraph xvii, licenses or sublicenses by the Debtor of its Intellectual Property as part of a research and development or similar arrangement, or in fulfilling its existing obligations pursuant to its collaboration agreement with
Gilead Sciences, Inc., shall be excluded. Debtor shall provide Secured Parties with a listing of licenses and sublicenses granted to third parties within ten (10) days of receipt of written request.

TERMS USED, BUT NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN TO THEM IN THE AGREEMENT. EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT SHALL REMAIN IN
FULL FORCE AND EFFECT. IF THERE IS ANY CONFLICT BETWEEN THE PROVISIONS OF THE AGREEMENT AND THIS AMENDMENT NO. 3, THEN THIS AMENDMENT NO. 3 SHALL CONTROL.

IN WITNESS WHEREOF
, the parties hereto have executed this Amendment No. 3 by signature of
their respective authorized representative set forth below.